November 17, 2017 / 9:40 AM / a year ago

UPDATE 1-Swedish housing starts slow in Q3 as market cools

(Adds analyst comment)

STOCKHOLM, Nov 17 (Reuters) - Swedish housing starts slowed slightly in the third quarter, data showed on Friday, providing further evidence that the formerly red-hot property market is cooling off.

Sweden has seen a construction boom in the last few years as builders try to catch up with a rise in the population and cash-in on surging house prices.

But a glut in supply, worries about future rate rises and tighter borrowing rules have begun to affect house prices, which fell for the second straight month in October.

While housing starts were up 11 percent at 49,800 in the first three quarters, they fell to 14,000 in the July-September period from 14,250 the year before, data from the Statistics Office showed.

“This figure presents a downside risk for GDP,” said Olle Holmgren, an analyst at SEB.

“It shows that the slowdown in the housing market has already started to have an impact and to a slightly greater extent than we had expected.”

Sweden’s economy has surged recently, expanding 3.3 percent last year after 4.5 percent growth in 2015. A big contributor has been housing investment.

A significant fall in prices would hit housing investment and consumption and drag down growth.

Prices have risen nearly 40 percent over the last three years and most analysts see the recent reversal as a welcome sign that the market is starting to normalize.

But some have said that if authorities go ahead with further plans to cool the market, price falls could be much bigger.

Reporting by Johan Sennero; Editing by Simon Johnson and Angus MacSwan

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