SBAB foresees a slow recovery in the Swedish economy, with the recent interest rate cuts expected to take effect only next year. This insight is drawn from the bank’s latest report, Bomarknadsnytt. The gradual pace of recovery is attributed to “the Riksbank’s late awakening regarding inflation pressure,” according to the bank’s chief economist, Robert Boije.
“Hopefully, the Riksbank’s new outlook on both inflation and the interest rate path – which now essentially aligns with what SBAB has been advocating since August last year – can contribute to more positive households and increased consumption in the future,” stated Robert Boije in a press release.
The forecast suggests that the policy rate will be lowered three times by next summer – a cut at the upcoming monetary policy meeting in December, followed by two more in January and May next year. Additionally, there is a possibility that the policy rate could fall below 2% if unemployment rises significantly and inflation continues to fall below the Riksbank’s 2% target for an extended period.
Swedbank shares a similar outlook, projecting that the policy rate will settle at 1.75% by summer. “With inflation close to the target, the Riksbank has shifted its focus to the real economy and the labor market. We expect further interest rate cuts down to 1.75% in June next year,” as stated in Swedbank’s Economic Outlook for November.
In terms of housing prices, SBAB predicts a 4% increase in both 2025 and 2026. Household incomes are expected to be the primary driver of housing price growth in the coming years. Handelsbanken also supports SBAB’s forecast, stating in their property report that household indebtedness will remain at current levels, with housing prices increasing by approximately 4% annually.
While the construction sector is not expected to experience a rapid upturn in the coming years, there are signs of improvement. Housing prices in the second-hand market are rising, household incomes are increasing, and monthly fees for existing condominiums have been raised. This could make new construction more competitive, according to SBAB.
“For many home builders, the past two years have been disastrous. However, the significantly lower long-term mortgage rates, price increases in the second-hand market, rising household incomes, generally increased optimism among households, and rising fees in existing condominium associations should instill some hope. Nevertheless, a rapid turnaround is unlikely,” concluded Robert Boije.
Overall, the economic landscape in Sweden is poised for a gradual recovery, with various factors influencing the trajectory of interest rates, housing prices, and construction activity. The insights provided by SBAB, Swedbank, and Handelsbanken offer valuable perspectives on the future of the Swedish economy, painting a nuanced picture of the challenges and opportunities ahead.