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Sweden must cool its real estate market: IMF

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Aparments in Rågsved. Photo: TT
15:36 CEST+02:00
The International Monetary Fund said on Friday that Sweden should cool its booming real estate market, which is causing household debt to shoot through the roof.
House prices rose by as much as 12.5 percent in April compared to a year earlier for some types of homes, the Washington-based institution said in a preliminary annual report on Sweden's economy.
   
The high level of credit growth in Sweden pushed up household debt in the country to nearly 175 percent of disposable income in 2013, the IMF warned, suggesting three remedies.
   
First, it suggested introducing a maximum period for people to take out mortgages, in a country where many households pay back their loans so slowly that they hardly dent them.
   
Last year, the IMF slammed Sweden's average mortgage amortisation schedule for the more solvent households, which was at 140 years.
 
 
Second, the fund proposed an unspecified limit to monthly payments based on income.
   
The final proposal was to increase the minimum deposit on a house to 25 percent of the total price, from 15 percent currently.
   

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The IMF also urged Sweden to accelerate new construction, arguing that "the demand for housing is outstripping supply, reflecting ongoing rapid urbanisation and immigration trends".
   
The Fund lowered its 2014 growth forecast for Sweden by 0.2 points to 2.6 percent.
   
It praised the centre-right government's reforms to encourage Swedes to work, but pointed out a "substantial rise" in unemployment, especially among youths, foreign-born and old workers.

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