“Compact darkness in housing construction”

Published 20 March 2024 at 13.20

Economics. SBAB warns that a 30 percent rise in construction costs contributes to “compact darkness” in housing construction.

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Sales of new homes go still very fragile and housing construction is falling flat. This is shown by the SBAB Booli Housing Market Index (HMI).

– Unfortunately, I think that we will have to wait a longer time before we see a greater increase in the sale of new homes and that housing construction picks up again, says Robert Boije, chief economist at SBAB, in a press release.

The average sales time for the homes that are still sold is over a year.

Construction costs, which in three years have increased by over 30 percent, according to SBAB, constitutes a large part of the problem. The proportion of new homes with reduced prices remains at high levels. It is an unprecedented large rise in construction costs in a short period of time, which has hit housing construction hard.

– The other day, new data came from Statistics Sweden showing that construction inflation in February was at the lowest level since March 2021. That is, of course a step in the right direction that construction inflation has now fallen back sharply, but it does not solve the problem that construction costs have increased by over 30 percent in a short time. This is especially so as prices on the secondary market during parts of the same period have fallen, says Robert Boije.

If you ignore the need for new homes and look at the demand for new homes taking into account the households' actual ability to pay, during the fourth quarter of last year it was largely balanced in relation to the supply of new housing in all forms of housing for Sweden as a whole. However, there are large local and regional variations, with, for example, a surplus of new condominiums in Västra Götaland County.