Both construction and home sales decline

The cost of constructing homes has increased by 30 percent over three years, according to a compilation by SBAB.

Construction volume has decreased, and moreover, the homes that are put on the market take a long time to sell. Typically, it takes over a year for a home to be sold. The proportion of price-reduced new homes remains high.

Ignoring the need for new homes and considering demand based on households’ actual ability to pay – there was essentially a balance between supply and demand for new homes across all types of housing in the fourth quarter of last year. Of course, there are local variations, such as a surplus of new condominiums in Västra Götaland County.

“Unfortunately, I think we will have to wait a longer time before we see a significant increase in the sales of new homes and a ramp-up in housing construction. The continued decrease in inflation and expectations of upcoming interest rate cuts are still a glimmer of hope, as is the fact that construction costs have stopped rising so rapidly. This, along with the recently rising prices of homes on the secondary market – which compete with new construction – might still provide some confidence for hard-pressed home builders,” says Robert Boije, Chief Economist at SBAB, continuing:

“While we know that many new homes need to be built in Sweden, not least to ensure the supply of skills in growth areas with existing housing shortages, the high inflation and significantly higher interest rates have hit the purchasing power-based demand for new homes hard. Plummeting sales have forced home builders to apply the brakes. Despite the decline in demand, we now see that the decrease in home construction is so significant that it exceeds the reduction in demand in many places. This has contributed to a better balance between supply and demand in areas that previously showed signs of overproduction of new homes relative to what households could afford to demand.”