STOCKHOLM — Risks in the Swedish financial system have increased, particularly in the heavily indebted commercial real estate sector to which banks have a large exposure, the central bank said in its regular Financial Stability Report on Thursday.
“Property companies are now under pressure from the higher interest rates, partly because their funding costs are increasing and partly because the value of their properties is falling,” the Riksbank said in a statement.
“Several companies have large borrowing needs. The Riksbank considers it important that companies continue to strengthen their balance sheets,” it added.
Worries recently have centered on real estate group SBB , which is looking for a buyer after its debt was cut to “junk” status and it was forced to halt dividend payments, sell assets and drop a planned round of equity financing.
But SBB is not the only company to struggle with soaring interest rates, falling property values and tighter credit conditions.
Rating agency Moody’s said this week it had taken negative rating action on about 50% of the real estate firms it covers in Sweden.
Worries about the sector – which triggered Sweden’s last financial crisis in the early 1990s – have even hit the crown currency, which is trading at its weakest level against the euro for well over a decade.
Regulators say banks are better equipped to deal with turbulence in the sector having beefed up their capital buffers after the global financial crisis in 2008-2009.
Bank resolution regulations have also been improved.
But concerns have nevertheless been rising as the surge in interest rates over the last year has exposed faults lines in the financial system, bringing down small lenders in the United States and forcing authorities to arrange a shot-gun wedding for Credit Suisse.
“The banks … have an important role to play, both by maintaining the supply of credit to viable companies and within the framework of their lending, by requiring property companies to take measures to reduce their financial risks,” the Riksbank said in the report.
The real estate sector makes up around 45% of banks’ business lending in Sweden.
(Reporting by Simon Johnson, editing by Terje Solsvik and Sharon Singleton)
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
The Canadian Press. All rights reserved.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
The Canadian Press. All rights reserved.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
The Canadian Press. All rights reserved.
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