'No housing bubble in Sweden': central bank
Published: 20 Jan 11 15:24 CET | Print version
Online: http://www.thelocal.se/31550/20110120/
Sweden's central bank, the Riksbank, does not see a housing bubble or bubble-like behaviour in the housing market, according to a high-ranking official at the institution.
- Housing costs cause Swedish inflation spike (13 Jan 11)
- Fewer Swedes believe in rising home prices: SEB (12 Jan 11)
- Riksbank raises interest rate by 0.25 percent (15 Dec 10)
"But this is a difficult matter. One cannot exclude that there is a certain overvaluation that may be due to some over-optimism in terms of the continuing development of interest rates," she said at a hearing on the development of the housing market by Sweden's parliament's, the Riksdag's, finance committee.
Wickman-Parak said that the growth in Swedish household debt was alarming. Borrowing is increasing by 8 percent per year, which is unsustainable at current levels.
"We have a debt ratio that we have not seen anything equivalent to," she said.
Wickman-Parak added that it is difficult to tackle the developments in the market simply by sticking to the inflation target. However, interest rates must be raised to meet the inflation target, as well as to dampen household borrowing.
Despite the warnings, Financial Markets Minister Peter Norman sees no immediate threat of a bubble developing in the housing market.
"There is no immediate threat to financial stability, but we are concerned that the threat could extend in the future," he said.
Norman singled out the housing market, household debt and bank expansion as three worrying factors.
According to Norman, there are several measures that the government can resort to if it becomes necessary, but there is no need for them so far. Without specifying what could be done in the first place, Norman suggested several possibilities.
They include reducing the opportunities for the deduction of interest expenses, abolishing interest deductions for consumer credit, amortisation requirements, changes in capital coverage requirements for banks and stamp duty.
"There are a large number of tools and the government is largely prepared to intervene," he said.
What do you think? Leave your comment below.
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YOU ARE 100% WRONG.
Sweden is skewing its economy to growth, based on rising property prices and the financial sector, just as Ireland and Greece did before falling into an economic abyss.
That is increasing the risk of an economic crash due to a problematic systemic economic model, from a medium level, steadily towards highly likely.
It is obvious nothing was learned in the 90's in Sweden and that Sweden is determined to make the economic crashes that occured in Iceland, Greece and Ireland, look like a walk in the park.
Short sightedness, greed, arrogance, stupidity and delusions of grandeour can only explain so much, expecially in a country that has so often engaged in long term planning of its economy, until now. The warning signs are now very obvious, yet are being deliberately ignored. I am beginning to wonder if this is deliberate to create a massive crash in Sweden, after the worst is over in the rest of Europe.
PS: As a matter of interest it might be worth taking a look at who has shorts that benefit if there is a crash in Sweden, as well as who there families and social circle are.
Some kommuns have yet to regain the property priced of the late 1990s
Everywhere I have been so far in Skåne, Smaland and Halland is above the 90's prices and still rising.
Dalarna is very sparsely populated, so price rises will take a lot longer to reach there. However they will come to Dalarna sooner or later. Most likely it will be earlier going by how the market is changing.
Yep Sweden is on the slippery slope again history really does repeat itself !
I've been reading THELOCAL.SE for about two years now....and like OH eM G nothing ever happens thats new. The above statements, while all valid (in particular the one by Yuretz --very informative) always conjour up the same (again) valid points about how this country is going to go down a hole and how things aren't really as rose behind the yellow and blue curtain.
They are having a property bubble. Let them enjoy it as the hangover the next morning is a bad one (call any number starting in +353 or +30 to hear the wails of distress.
Sweden gives too much money back to people who buy a house-SBAB, having adjustable-rate mortgages , tax credits for 30% of your interest rate costs..banks even give bonuses to workers based on the amount of mortgages that they sell--i think former employees of Ireland are working in Sweden now..hmmm
Sweden is a self-important, elitest country, who pretends to have its borders open. The truth is Sweden is a massive Arms dealing country and when they are shipping this stuff to the likes of Somalia*, the somlian gov't are saying.."sure take a few hundred of our people off our books in the deal to seal it"....in australia a slab of VB would sufice and in Ireland a bottle of Jamison
*Sorry for using somalia as an example. Its not in half the state that its portrayed to be in and the people who live in the drought "choose to" not leave it due to their historical ties with the area. apparently, APPARENTLY, 80% of the country is rich farmed land with beautiful landscapes. I should have used Ireland as the example but they no longer buy arms :p
In our current search for a new house, three estate agents told us to wait - the bubble will burst in the spring - do they know something we don't? Oooh the negative equity.
House shortage? Me arse. Theres just a shortage of good location housing.
To dammen. 3 mths down the line the swedish economy will still be doing great. Even, I dare say it, better than now. The ideal time to buy was a few years ago...but I dont think ya've missed the boat by too much if you were to buy now.
You'll know there is a bubble bursting session coming when people who were living in the "city centre" start moving out to the likes of Sodertalje and Upplands-Bro and even further.
This will be a direct result of the inner city land being worth so much, that a move outside the city limits is traded off by the Massive cash windfall. thats when the market knows its times to blow its top because the debt people have taken on will have reached epic proportions :D
P.S. YA GOTTA LOVE SWEDESMITH'S comment! Good chuckle there mate.
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929
Cyclicality is the normal state of affairs in capitalism. Interest rates are being kept artificially low, for too long. All the psychological incentives for the elites are there: bankers get their bonuses, politicians get their taxes, businessman get their profits. Common folk in Sweden is exceptionally naive and easily controlled by the elites. Additionally, there is a very strong political incentive to lower unemployment (esp. among the young) and provide good news in the midst of depressing winters: the rise of Sweden Democrats. Short-term thinking is unavoidable in current democratic systems. We get the usual denials, which would never come from such high places if there were not a problem. Why would the PM deny a bubble, unless there was one? It simply wouldn't be a priority for the PM to speak on the subject, unless somebody decent and well-informed had sleepless nights fearing the problem.
So there most likely is, or will be a bubble.
The question is how bad is it going to be? Here I would inclined to be a cautious optimist. Probably not as dramatic as some here suggest. It's still a solid, well-organised, well-connected country where people basically like to work. Get some perspective: the country may be run by people who are a bit arrogant and controlling, but at least they are not mad, alcoholics, or totally corrupt, like most other places.
What I don't get in this country is why banks give home loans for 50 years ... that implies that you are still paying down your morgtage when you retire (that is madness) ... house prices are deliverately kept high by Banks ...
Once again ... I have seen this before ... Prices can only go down as the Base Rate goes up ...