Russia Today (RT) mentioned that the number of bankruptcy filings surged to the highest level in at least a decade in January. It cited a Feb. 1 Bloomberg report that also pointed out the increase coinciding with an ongoing housing market crunch.
Based on data it obtained from the Swedish credit reference agency UC, Bloomberg said the number of bankruptcy filings rose to 622 – a 47 percent increase compared to a year earlier. The construction sector was among those most affected by the economic recession, with defaults surging in the industry. In January 2022 alone, 130 builders went bust.
Johanna Blome, an economist at UC, said: "During [the] fall, we saw bankruptcies in consumer-facing businesses such as retail, hotels and restaurants. Now, we see that the largest increase is happening in sectors that are closely connected to industry and longer-term investments."
The Swedish real estate sector has damaged the Nordic region's largest economy, with house prices dropping to their lowest in three decades. From a peak in the first quarter of 2022, prices have reportedly fallen by 16 percent. Economists project the slide to continue further.
Based on estimates from the Swedish National Board of Housing, Building and Planning, new home construction will fall dramatically by 44 percent to 33,000. A drop in construction could further impact economic activity.
At the end of 2022, Stockholm announced that the country was entering a recession and that it would last until 2025. The nation's gross domestic product (GDP) is projected to fall by 0.7 percent. Unemployment is projected to rise to 7.8 percent this year and 8.2 percent in 2024.
A separate Bloomberg report from December of last year warned about Sweden's housing crisis. It pointed out that after almost two decades of stable growth, the country's property market is undergoing "a dramatic change."
Surging inflation and rising borrowing costs prompted housing prices to drop by 15 percent. An unfolding cost-of-living crisis coincided with this drop, prompting Swedes to cut spending drastically. The resulting one-two punch further affected the property sector, with economists now projecting the decline in home prices to pass the 20 percent drop-off level originally predicted.
Maria Wallin Fredholm, an economist at the Stockholm-based Swedbank, remarked that Sweden's housing market is the most vulnerable among the 27 member states of the European Union (EU). This is because of the country's monetary policy that "has a faster pass-through here than in other economies," she said.
While about 64 percent of Swedes own their homes, most do not have long-term fixed-rate mortgages, Bloomberg noted. This exposes them to rising interest rates, which are now at their highest levels in more than a decade, thanks to rate hikes by the Sveriges Riksbank – the country's central bank. (Related: Mortgage rates surge to 20-year high, causing massive drop in home sales.)
With plummeting lending and retails sales, fears of consumer spending grinding to a complete halt are mounting. Annika Winsth, chief economist of Copenhagen-based Nordea Bank, warned that there are "no positive signals from the domestic economy, and especially not from households or the housing market."
Bloomberg pointed out that household debt comprises 90 percent of GDP, which meant higher borrowing costs will severely affect consumption.
Moreover, the article mentioned that a more acute risk may lie in the commercial real estate market. Commercial lending accounts for up to 36 percent of loan books in major Swedish financial institutions. A severe downturn in the sector could put significant pressure on the country's banks, it warns.
Economists ultimately warned that if inflation persists, the situation in the property market could deteriorate further. Given this, Sweden is now at risk of falling into the worst recession among the EU bloc.
Watch Josh Sigurdson of World Alternative Media warn about the housing crisis in the U.S., the same problem Sweden faces.
This video is from the World Alternative Media channel on Brighteon.com.