March 22, 2018 / 9:08 AM / a year ago

Swedish housing starts seen falling 15 pct as boom ends -trade group

STOCKHOLM, March 22 (Reuters) - Housing starts in Sweden are seen falling sharply this year and next from peak levels, marking the end of a building boom, a construction trade and employers’ association forecast on Thursday.

Sveriges Byggindustrier’s biannual report on the construction outlook forecast a 15 percent decline in housing starts to 55,000 this year after a 19 percent jump in 2017. Housing starts were seen down a further 16 percent next year.

After four straight years of rapidly growing investments in new housing, investment levels - which slightly lag production levels - will slow somewhat in 2018 and then more steeply in 2019, it said.

“Good wealth development, low rates and a strong labour market has led to a favourable environment for house building,” the association said.

“Going forward, however, much stricter granting of credit, modest real wage rises, rising mortgage interest rates for households and limitations to interest deductions for housing companies will worsen the macroeconomic environment.”

Swedish property prices have risen fast over the past couple of decades. But home prices have dipped in recent months, mainly because of the surge in building and the introduction of tougher mortgage repayment rules aimed at curbing high household debt.

On Wednesday the Swedish government proposed restrictions on interest rate tax deductions for companies while also cutting corporate tax.

Sveriges Byggindustrier said it was basing its fresh forecasts on roughly stable house prices for some time ahead.

Total construction investments in Sweden will edge up 2 percent this year, primarily on the back of facility investment growth, but will shrink in 2019, the association predicted.

“The building boom is thereby coming to an end,” it said.

Reporting by Anna Ringstrom Editing by Niklas Pollard and David Goodman

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