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The Scandinavian economies have shown to be robust throughout the years, with no recent economic crises. However, analysts anticipate that one of Europe's most active real estate markets will see a downturn following a prolonged bull market.
Scandinavia is often regarded as the birthplace of social democracy, liberalism, and various cultural values formed from a half-century progressive thought. For example, housing has always been regarded as a social benefit rather than an asset class in Scandinavian nations. As a result, successive administrations in Scandinavian nations used government measures to limit speculation in the property market.
However, it appears that this altered towards the turn of the century. Property markets grew more liberalised, and as a result, popular forms of investment emerged. Foreign investors attempted to profit from these housing markets. In addition, rises in population caused by immigration resulted in a fast expansion in the housing market in nations such as Sweden and Norway, resulting in more house sales, increased building, and increases in house prices.
The opening up and expansion of these property markets drew international investors, sustaining the boom in these nations' housing markets. As a result, prices skyrocketed to unsustainable levels. Furthermore, this resulted in a mismatch in demand and supply due to the overdevelopment of higher-end housing, resulting in the neglect of middle-class housing.
In Sweden, prices increased by 50% during five years and are currently 70% higher on average than the time preceding the boom. It appears that a lot of speculative money has poured into these markets in recent years. House prices are expected to decelerate and fall in the immediate future, according to analysts. Prices are anticipated to fall further before stabilising as banks in these nations become more cautious and conservative with lending. This means that investors are being pushed to explore elsewhere for property investment possibilities.
Property values are expected to fall by about 10%, which is a natural adjustment. In recent years, weak lending rules in the property industry have resulted in significant household and corporate debt growth. High indebtedness is not a pattern often associated with Scandinavian nations.
Debt levels are at their greatest since the early 1990s financial crisis, owing to cheap mortgage lending and financing. As a result, debt-to-income ratios have gradually grown over the years, forcing Swedish authorities to take action to avert a debt spiral.
Sweden has been gradually creating its subprime crisis. The Swedish government has responded by enacting stricter lending laws, raising the percentage of deposit required for property acquisition, and requiring lenders to repay principal in shorter time frames. However, in the absence of the credit stimulus, the housing market has come to a halt. It has taken time for a complete reaction between supply and demand variables and an adequate pricing response to occur. However, prices have already begun to fall, and it looks that the Scandinavian housing market is gradually cooling.
These consequences are expected to be felt for a few years as the economic effects of the housing market downturn continue to kick in, resulting in further macroeconomic headwinds. Nevertheless, some economists remain optimistic, predicting a gentler landing for the Scandinavian economies. Low unemployment and the probability of interest rates remaining low in the long run indicate that economic productivity and consumer expenditure will be maintained.
Scandinavians who are still flush with cash will now turn their attention to other areas that appear to be promising. Spain is an excellent example of such a market.
Other Scandinavian economies will undoubtedly continue to do well, and the slowdown may only be noticed in the housing and banking sectors. Because of the expected low unemployment, Scandinavians will still have enough money to invest. Moreover, affluent first-time buyers with financial reserves will ignore the country's deteriorating real estate markets, favouring possibilities elsewhere.
Spain's real estate market remains hot, with consistent growth throughout the years. The Spanish property market is anticipated to rise by 6% in 2018. The market is projected to develop more in 2019, so foreign investors' flood is expected to continue uninterrupted. This steady demand will keep prices stable and stimulate growth.
There is no better location for Scandinavian investors to put their money than the Spanish home market in current conditions. The Spanish housing market will stay hot as long as the Spanish economy continues to develop steadily and Spain has a strong connection with the UK post-Brexit. This will undoubtedly continue to attract Scandinavian investment.
Contact us today to sell your property in Spain to Scandinavian buyers.