Borg: housing market set for 20 years of stagnation
Published: 26 Feb 13 15:55 CET | Print version
Online: http://www.thelocal.se/46418/20130226/
Sweden's real estate market is headed for two decades of stagnation, Swedish Finance Minister Anders Borg warned on Monday, reiterating his concerns about the size of Swedes' household debts.
- 'Sweden next in line for housing market crash' (17 May 13)
- Borg drops resistance to EU fiscal stimulus (15 May 13)
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Speaking at the University of Gothenburg on Monday, Borg lamented Swedes' ballooning household debt, but warned that quickly clamping down on lending could cripple the Swedish economy.
"That's something we could achieve relatively quickly, but then we'd end up with a monetary contraction that could result in reduced or flat consumption for at least four or five years," he said, according to DI.
Unemployment would also rise, he added, "and we don't want that."
Borg instead called for a more measured reduction in Swedes' household debts that doesn't adversely affect consumption.
He also urged homeowners to abandon widely-held assumptions that home prices will continue to rise, forecasting the country's housing market will likely stagnate for the next twenty years.
"I don't think people should think like that. For the next one or two decades they should instead think that things will mostly move laterally," said Borg.
While the government and the Financial Supervisory Authority (Finansinspektionen) have already taken steps to tighten banks' lending requirements, Borg said he was open to a number of other measures to restrain mortgage lending, including raising banks' mortgage risk weights.
"We can raise those from 15 to 20 percent if we believe it's necessary. We also have the mortgage ceiling, and we might consider implementing an amortization requirement," Borg told the audience, emphasizing the importance of a slowdown in Swedes' rising debts, even if it means consumption is less robust.
"Consumption will recover, but it will likely be more modest than explosive," said Borg.
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History tells us that when Ministers of Finance predict stagnating house prices, that it is a prelude to house prices falling.