Nordic housing market outlook: muted rather than downhill

Th e ultra-loose monetary policies and lasting housing gaps led to credit-fueled housing booms in Sweden and Norway in the post-crisis era. Yet, over last two years both countries saw real estate markets cooling along with tighter lending rules and strong housebuilding activity. The Danish housing market also saw a resilient house price recovery following the crisis, yet significantly more moderate given the need of households to deleverage. Meanwhile Finish housing market has regained strength only more recently boosted by stronger GDP growth over last three years. Ongoing dwelling completions, stricter lending rules and gradual monetary policy tightening will weigh on housing demand and prices, especially in Sweden and Norway. On the upside, all countries saw large labour market improvements, which along with muted house price responses and supportive social security systems, should offset a worsening in affordability stemming from gradual credit tightening. Also, more moderate demand will result in less construction efforts, curbing housebuilding over time.