Nordic housing markets: downhill from here?

We published i n March a special report presenting the short-term determinants of house prices and a model for near-term forecasting for Sweden . In this piece, we update and extend the frame work to other Nordic countries of interest, i.e. Denmark and Norway, where prices have also shown softer patterns in the last few months. Akin to the Swedish case, very accommodative monetary policies and lasting housing gaps have fueled credit-driven booms in the housing sector and ultimately higher prices in the post-crisis era . Bearing in mind the co ming (albeit gradual ) normalization of monetary policies in Nordic countries , this publication aims at updating our conditional forecasts on price developments in the near-term. Our model provides contrasting messages for the two countries: w hile it foresee s a gradual rebound in prices in Norway – where the recent weakness mostly stemmed from higher construction activity – to +2.5% y/y towards the end of 2019; it paints a bleaker picture of the Danish housing market, where prices are set to gradually shrink and finally drop by 6.2 % in the last quarter of 2019. An update of the housing model for Sweden yields somewhat positive results as prices are set to have bottomed out in Q1 this year (-4.6% y/y ) , although annual price growth should continue to evolve in negative territory throughout the entire forecast horizon.