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Where High Interest Rates Have Sent Home Prices Sliding
In Sweden, the central bank’s fight against inflation is crimping economic growth and has contributed to a 15 percent drop in home prices.https://www.nytimes.com/2023/03/21/business/sweden-housing-prices-interest-rates.html
https://archive.is/E7xJA
Stockholm’s Old Town area in Sweden, which is experiencing the most severe downturn in its housing market in decades.
When Madeleine Eiswohld decided to move in with her boyfriend last year, she never expected to find it so difficult to sell her apartment. It’s a cozy studio, with lots of natural light, in Huddinge, an increasingly desirable suburb of Stockholm. But the timing was all wrong. She listed her place as Sweden’s housing market was tumbling through its most severe downturn in three decades. After only a few people viewed her apartment, Ms. Eiswohld lost hope that she would recover the money she had paid for it less than two years earlier. “It’s been very scary,” Ms. Eiswohld, a 28-year-old visual merchandiser, said in her living area recently. In the end, the apartment sold last month for 1,955,000 krona ($188,000), about 4 percent less than what she had paid.
It could have been worse. From her kitchen table, she can see an identical apartment across a courtyard that recently sold for less. House prices in Sweden plummeted about 15 percent from their peak last March to the end of last year, and have mostly plateaued since then. The war in Ukraine, a European energy crisis and a global surge in inflation that has pushed up interest rates put an abrupt end to a run-up in Swedish house prices during the pandemic, when people outbid one another to move into larger homes.
“It’s been very scary,” Madeleine Eiswohld said of her effort to sell her apartment in Huddinge, Sweden.
Huddinge has become an increasingly desirable suburb of Stockholm.
Central banks around the world have spent most of the past year in a struggle against inflation. After sharply raising interest rates, major central banks, including the U.S. Federal Reserve and the European Central Bank, are warning that inflation may persist longer than expected. Just as some banks have been caught off guard by quickly rising interest rates, economists are nervously eyeing global housing markets for signs of distress. Property prices have been heading south in Britain, Germany, the Netherlands, Canada, Australia and the United States.
But few places have been hit as hard as Sweden, which features an incendiary mix of high levels of household debt and the widespread use of variable or short-term fixed rates on home mortgages loans. Three-quarters of new loans in Sweden have either a variable rate or a fixed rate for less than a year, according to the latest data from the European Mortgage Federation. In the eurozone, the average is about 25 percent, and it’s a long way from a typical American mortgage, where loans are often fixed as long as 30 years. So Swedish households quickly feel the impact of rising interest rates, pushing them to cut spending to pay higher mortgage costs. Since April, Sweden’s central bank, the Riksbank, has raised interest rates to 3 percent from zero. And analysts expect the rate to keep rising amid signs that inflation, which rose at an annual rate of 12 percent in February, is becoming embedded in the economy.
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A Stockholm cafe. Sweden’s annual inflation rate was 12 percent last month.
Old Town seen from Skeppsholmen, a Stockholm island.
Modern housing in Stockholm. Apartment prices across Sweden have fallen 11 percent over the past year.
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Swedish inflation spikes to 12 percent
Swedish inflation defied the central bank’s mitigating rate hikes, unexpectedly spiking to 12 percent in February, according to official statistics, fuelling expectations of a contracting economy.
https://www.thelocal.se/20230316/swedish-inflation-spikes-to-12-percent/
Facing a drop in the value of the krona, Sweden is now experiencing one of the highest inflation rates in Europe, and the highest outside of Eastern Europe. After being inflated by energy prices in the autumn, the hike in prices is now being driven by food costs, which are rising at a level not seen since the 1950s, according to Statistics Sweden (SCB).
Inflation peaked in December at 12.3 percent — a more than 30-year high — then slowed down slightly in January to 11.7 percent. Economists expected inflation to remain at January levels, but not to accelerate. In the euro area, inflation slowed in February for the fourth consecutive month to 8.5 percent.
Trying to rein in inflation, the Riksbank — Sweden’s central bank — has repeatedly hiked its guiding rate. The key rate has increased from zero in April last year to 3.0 percent, with another hike of 0.25 percentage points expected next month and potentially another in June.
For 2023 as a whole, the central bank expects the Swedish economy to contract 1.1 percent, unadjusted inflation of 8.6 percent and rising unemployment, according to its latest forecast in February. In the European Commission’s latest forecast, Sweden is the only EU country expected to see its economy contract this year.
snip
Swedish inflation defied the central bank’s mitigating rate hikes, unexpectedly spiking to 12 percent in February, according to official statistics, fuelling expectations of a contracting economy.
https://www.thelocal.se/20230316/swedish-inflation-spikes-to-12-percent/
Facing a drop in the value of the krona, Sweden is now experiencing one of the highest inflation rates in Europe, and the highest outside of Eastern Europe. After being inflated by energy prices in the autumn, the hike in prices is now being driven by food costs, which are rising at a level not seen since the 1950s, according to Statistics Sweden (SCB).
Inflation peaked in December at 12.3 percent — a more than 30-year high — then slowed down slightly in January to 11.7 percent. Economists expected inflation to remain at January levels, but not to accelerate. In the euro area, inflation slowed in February for the fourth consecutive month to 8.5 percent.
Trying to rein in inflation, the Riksbank — Sweden’s central bank — has repeatedly hiked its guiding rate. The key rate has increased from zero in April last year to 3.0 percent, with another hike of 0.25 percentage points expected next month and potentially another in June.
For 2023 as a whole, the central bank expects the Swedish economy to contract 1.1 percent, unadjusted inflation of 8.6 percent and rising unemployment, according to its latest forecast in February. In the European Commission’s latest forecast, Sweden is the only EU country expected to see its economy contract this year.
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Why are food prices in Sweden going up so much more than elsewhere?
Pressure is growing on ICA, Coop and Axfood, Sweden's traditional supermarket triopoly, after Sweden's finance minister Elizabeth Svantesson said it was "hard to understand" why food prices were rising so much faster in Sweden than in neighbouring countries. But is it their fault?
https://www.thelocal.se/20230316/why-are-food-prices-in-sweden-going-up-so-much-more-than-elsewhere/
Finance Minister Elisabeth Svantesson has called the leaders of Sweden's three big supermarket chains to a meeting.
How much have food prices gone up in Sweden?
Prices of food and non-alcoholic beverages in Sweden have risen by 21 percent between last February and this February, the biggest increase since the start of the 1950s, eclipsing even the high-inflation years of the 1970s. “During the 1970s and 1980s, grocery prices also rose a lot, but not by as much as they are doing now,” John Eliasson, a price statistician at SCB, said in a press release announcing the new figures. Prices of eggs, dairy products, and fats have risen the most, with each category rising in price by more than 30 percent in a single year. Two of the products which have seen the most extreme rises are leeks and cauliflowers, which have both risen by more than 80 percent in price, with most of the rise happening just over the last month. Cauliflowers rose 48 percent in price between January and February, tomatoes by 38 percent and peppers by 34 percent.
‘Hang every greedy ICA-owner’
A discussion on Sweden’s internet forum Flashback laid the blame for high prices firmly on the supermarket. “Time to hang every greedy ICA-owner,” read one post, according to the TT newswire. “All the greedy bastards behind this deserve to be shot,” went another. ICA, which has a franchise structure, sent a warning out to all of the owners of its different stores, warning them of a “risk of attacks against shops, individuals, or private property connected to the message being spread”.
But even Finance Minister Elisabeth Svantesson on Wednesday night sought to shift the blame for high prices onto the supermarket industry and their suppliers, saying the extent of the price rises was difficult to explain. “When Swedes’ shopping baskets have risen in price by over 20 percent in one year, and that hasn’t happened in other places around us, I think you have to ask questions,” she said in an interview on Swedish broadcaster SVT’s flagship news programme. Svantesson said she had called the leaders of Ica, Coop, and Axfood, Sweden’s three big supermarket chains, to a meeting next week. “This is hard to understand and I want them to explain it.”
Sweden’s supermarket sector is less competitive than in many other European countries, such as the UK, France, and Germany. Germany’s Lidl is the only foreign competitor to have broken into the market, and some argue that the lack of competition makes it easier for Sweden’s supermarkets to pass rising costs on to consumers. “There are record profits in the retail sector,” Daniel Suhonen, leader of the left-wing Katalys think tank, told SVT on Thursday. “If workers are seeing their costs increase enormously and not getting any increases in salaries, maybe the bosses of Ica and Coop supermarkets should consider doing the same.”
snip
Pressure is growing on ICA, Coop and Axfood, Sweden's traditional supermarket triopoly, after Sweden's finance minister Elizabeth Svantesson said it was "hard to understand" why food prices were rising so much faster in Sweden than in neighbouring countries. But is it their fault?
https://www.thelocal.se/20230316/why-are-food-prices-in-sweden-going-up-so-much-more-than-elsewhere/
Finance Minister Elisabeth Svantesson has called the leaders of Sweden's three big supermarket chains to a meeting.
How much have food prices gone up in Sweden?
Prices of food and non-alcoholic beverages in Sweden have risen by 21 percent between last February and this February, the biggest increase since the start of the 1950s, eclipsing even the high-inflation years of the 1970s. “During the 1970s and 1980s, grocery prices also rose a lot, but not by as much as they are doing now,” John Eliasson, a price statistician at SCB, said in a press release announcing the new figures. Prices of eggs, dairy products, and fats have risen the most, with each category rising in price by more than 30 percent in a single year. Two of the products which have seen the most extreme rises are leeks and cauliflowers, which have both risen by more than 80 percent in price, with most of the rise happening just over the last month. Cauliflowers rose 48 percent in price between January and February, tomatoes by 38 percent and peppers by 34 percent.
‘Hang every greedy ICA-owner’
A discussion on Sweden’s internet forum Flashback laid the blame for high prices firmly on the supermarket. “Time to hang every greedy ICA-owner,” read one post, according to the TT newswire. “All the greedy bastards behind this deserve to be shot,” went another. ICA, which has a franchise structure, sent a warning out to all of the owners of its different stores, warning them of a “risk of attacks against shops, individuals, or private property connected to the message being spread”.
But even Finance Minister Elisabeth Svantesson on Wednesday night sought to shift the blame for high prices onto the supermarket industry and their suppliers, saying the extent of the price rises was difficult to explain. “When Swedes’ shopping baskets have risen in price by over 20 percent in one year, and that hasn’t happened in other places around us, I think you have to ask questions,” she said in an interview on Swedish broadcaster SVT’s flagship news programme. Svantesson said she had called the leaders of Ica, Coop, and Axfood, Sweden’s three big supermarket chains, to a meeting next week. “This is hard to understand and I want them to explain it.”
Sweden’s supermarket sector is less competitive than in many other European countries, such as the UK, France, and Germany. Germany’s Lidl is the only foreign competitor to have broken into the market, and some argue that the lack of competition makes it easier for Sweden’s supermarkets to pass rising costs on to consumers. “There are record profits in the retail sector,” Daniel Suhonen, leader of the left-wing Katalys think tank, told SVT on Thursday. “If workers are seeing their costs increase enormously and not getting any increases in salaries, maybe the bosses of Ica and Coop supermarkets should consider doing the same.”
snip