What’s Causing the Swedish Housing Market Plunge

One of Europe's hottest housing markets has become one of the world's cold. When Sweden was hit by a property crash that wreaked havoc on its financial markets, the government took over banks that were on the verge of default. High prices and interest-rate hikes meant to combat fast inflation have combined to knock home values down more than 15% from their peak in March 2022.

There had been warnings for a long time about an exaggerated run-up in housing prices. Home values went up because of a shortage of housing, low interest rates and mortgages that only required interest payments for a long time. Most households are only obliged to pay down their debt to 50% of the value of their house, despite the new requirements. Home-price increases that outpaced wage hikes as well as gross domestic product expansion left a lot of home owners in debt.