Australian, Canadian and Swedish housing markets will not crash

The housing markets in Australia, Canada and Sweden have considerably cooled down after a long period of strong house price increases spurred by record low accommodative monetary conditions, rising net migration and supply lagging behind demand. We regard the housing slowdown and house price corrections as healthy given that they followed large construction efforts and introduction of macroprudential measures and regulatory constraints (thus correcting for the build-up of excesses and possible house price bubbles). While housing prices in Sweden recovered somewhat in late 2018 and prices in some big Canadian cities have supported the overall price level, Australian housing prices continue to fall. More house price declines in all three economies cannot be ruled out given that prices are returning to levels more in line with fundamentals. Yet, we are confident that in the medium- to longer-term the housing demand will stay shored up by rising population, low vacancy rates and still accommodative monetary conditions. Also, low defaults, stabilized household debt, healthy financial sector s and sound economic fundamentals continue to support the stabilization expected.