SWEDEN: Falling Rates Ease Mortgage Burdens; Business Sentiment Still Weak (2/2)

However, the Riksbank's September Business Survey noted that "demand for residential construction remains weak and expectations of a broader recovery have been further postponed". This suggests limited scope for a rebound in residential property investment in the coming quarters.

• Housing starts and completions contracted sharply as increased interest rates and inflation weighed on demand and increased costs. This was also reflected in a notable pullback in residential property investment - a dynamic also observed in Norway.
• Tomorrow's quarterly Economic Tendency Indicator will provide an update on how likely consumers are to purchase a home in the next 12 months. This series has been subdued since 2022, but moved one point off cycle lows in Q2. A more notable uptick would be a positive signal for hard data in the quarters ahead, but may not be enough to challenge the weak signals from the Riksbank's survey.
• Business expectations of a postponed recovery come despite an improvement in affordability since 2021/2022. Data from the BIS indicates that real house prices have fallen more in Sweden than other DM peers, while the IMF estimated that real house prices were no longer overvalued in its latest Article IV mission.