(Bloomberg) -- Swedish housing prices have recouped close to half of the losses they sustained in the first year of an inflation shock that sent borrowing costs higher and led to a near-standstill in homebuilding.

June statistics from the Association of Swedish Real Estate Agents show gains of 0.2% and 0.7% for apartments and detached houses, respectively, marking a sixth straight month of increases on nominal terms. The data comes as the Swedish central bank has started reducing borrowing costs in response to cooling inflation. The Riksbank has also indicated that further rate cuts are likely in the second half of the year. 

The development in the housing market is indicative of a shift toward more optimism about the Swedish economy, which was hit hard by rising consumer prices and borrowing costs in 2022 and 2023. Most Swedish homeowners have mortgages with rates fixed on short terms, which means that as the Riksbank takes its benchmark lower, relief for indebted households will be relatively swift.

“In the second half of the year, we expect prices to increase by a couple of percent,” Fredrik Kullman, chief executive at real estate agency Bjurfors, said in a statement. “We believe the gains will come mainly toward the end of the year, when the market has had time to take a breather and there may have been another two or three rate cuts at the same time as the large supply of homes for sale may have shrank somewhat.” 

In recent months, a number of forecasters have adjusted estimates to predict a larger economic expansion this year, and the country’s government has said it sees more room for measures to stimulate growth as inflation is trending toward the Riksbank’s 2% target. A slump in the construction of new homes has been a major drag on economic output, and while activity in the sector remains depressed, an indicator from data provider Byggfakta has shown a nascent recovery in recent months.

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