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Since the financial crisis, monetary policy globally has been extremely accommodative in an effort to bring economies and inflation back on track. While central banks’ success in fulfilling their mandate is debatable, the historically low level of interest rates has clearly been the key driver behind the new golden era of housing markets in many parts of the world.
In this report about Nordic housing we take a closer look at trends in the four Nordic countries where home prices – especially in Norway and Sweden – have seen a sharp rise.
For each country we review the three most important market themes at the moment. Although this is not a country comparison, trends in the individual countries have several common features.
Prices have seen markedly stronger rises in the capital cities of Stockholm, Oslo, Copenhagen and Helsinki than in the rest of the countries.
All the countries have implemented new regulatory measures to curb price rises and indebtedness. In Norway and Denmark, additional measures are aimed at addressing developments in one or several of the large cities.
Price trends and the low financing costs have triggered strong growth in new construction, notably in Sweden and Norway.
This combination of rising home prices and a pick-up in new construction could be a toxic cocktail if prices start to fall. Prices are already falling in Norway, but we judge that this is merely a modest correction from a high level.
The same could happen in the other countries, too, and the trends will be interesting to follow over the coming years. Only when monetary policy is tightened and interest rates rise will the stability of the Nordic housing markets really be tested.
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