Economist Sharon Lavie suggests that the Swedish housing market is currently offering more value for money due to a unique economic situation. Despite falling inflation and reduced interest rates, housing prices have not increased as expected, creating a 'sale' environment. However, SBAB's Robert Boije advises caution, noting that the market's dynamics vary depending on individual circumstances.
Economist: Housing Market Offers Bargains Amid Unusual Conditions
Economist: Housing Market Offers Bargains Amid Unusual Conditions
The housing market is currently offering more value for money, according to economist Sharon Lavie.
"It should be more expensive than it is," she says. However, SBAB's Robert Boije advises taking terms like "sale" and "buyer's market" with a grain of salt.
According to Sharon Lavie, a financial economist at Lendo, Swedish households are in an "unusual situation."
Inflation has dropped significantly, and interest rates have been lowered without housing prices following suit, she argues.
Generally, housing prices tend to rise when interest rates fall, making it cheaper for people to live, but the recovery in the housing market has been sluggish.
Economist: Why It's a 'Sale'
In an email titled "Unique Opportunity to Buy a Home on Sale," Sharon Lavie writes that it's a "strange combination" that "mortgages have become easier to bear in real terms, while homes are cheaper than inflation suggests they should be."
"The prices we see today in real value, in relation to what we earn, are lower than five to ten years ago. Considering the inflation we've had, it should be more expensive than it actually is, so you can say you get a bit more home for your money today than five years ago," says the financial economist.
"A Small Ray of Hope"
She states that the statement about sales mainly applies to people entering the housing market.
"Then this is a small ray of hope. The home you buy today would probably have been more expensive in real value five years ago, and it would have been harder to save up for it."
At the same time, there is no guarantee that a home bought today will increase in price.
"If the world turns upside down tomorrow and we suddenly face huge interest rate hikes, the housing market will likely be hit again, and prices will fall, but I believe that the housing value is still lower today, in relation to everything else, than it was a few years ago. If you keep the home and have a longer perspective, prices usually go up," says Sharon Lavie.
Losers in the Housing Market
She also emphasizes that it matters where you are in the buying and selling process.
If you own a home, the loan may have become cheaper as it is eroded by inflation, but you may have also lost money on your home and may not get enough from a sale to make a down payment on the next one.
"The losers are those who bought at the peak. We haven't come out of that slump," says Sharon Lavie.
Economist's Advice: Assess Your Own Situation
Robert Boije, chief economist at SBAB, agrees that prices have been eroded in real terms but does not believe that there is a sale on the housing market. He generally advises taking statements about "sales" and it being a "buyer's market" with a pinch of salt.
"It might be easier for people buying their first home to enter the housing market now than it was a few years ago. But in the housing market, there are also many people who already have a home, so many who buy a new one also have one to sell, and then it depends on whether it's good or bad that prices have fallen," says the chief economist.
"It depends on what situation you come from, whether you have something to sell, and whether you are buying bigger or smaller. Assess your own situation."