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'No housing bubble in Sweden': central bank

TT/The Local/vt · 20 Jan 2011, 15:24

Published: 20 Jan 2011 15:24 GMT+01:00

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However, Riksbank vice director Barbro Wickman-Parak sees growing household debt as a problem.

"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.

Story continues below…

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.

TT/The Local/vt (news@thelocal.se)

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Your comments about this article

15:43 January 20, 2011 by Yuretz
Are you sure?
15:54 January 20, 2011 by engagebrain
Isn't this what the always say before a bubble bursts.
15:59 January 20, 2011 by sendia
Thats what "THEY" say about every bubble.
17:22 January 20, 2011 by Nemesis
A statement and correction of ideology to the imbeciles who came up with the statement, that there is no housing bubble in Sweden.


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.
18:51 January 20, 2011 by Puffin
Obviously there have been big city price rises - especially for apartments but these are not universal - in some kommuns you would have no difficulty buying a villa for 500,000-1,000,000kr

Some kommuns have yet to regain the property priced of the late 1990s
18:58 January 20, 2011 by Nemesis
@ Puffin,

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.
20:11 January 20, 2011 by Frobobbles
There is an enormous bubble waiting to burst. Anyone can see that. Extremely low rent resulted in, not productive investments, but a rise in prices. People buy just what they can afford on the margin, and a higher rent will have devastating results.
20:31 January 20, 2011 by conboy
History repeating itself Hans Christian Andersson's tale of the King with no clothes comes to mind but then we have one of those here already Ha Ha.

Yep Sweden is on the slippery slope again history really does repeat itself !
20:36 January 20, 2011 by Acero

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
21:14 January 20, 2011 by dammen

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.
21:15 January 20, 2011 by Coalbanks
It is a bubble. Pay down debt, accumulate cash,( maybe convert cash to a safer currency ie $Cndn which will rise in relation to KrSweden), and buy the bargains when the bubble bursts. If it were not for Sweden's exports the bubble would have burst by now. Perversely it is the exports that create the inflation of salaries, house values. Ain't economics great?
21:20 January 20, 2011 by BigBilly
Bubble or no bubble did they need a pic of a bubble?
23:17 January 20, 2011 by Swedesmith
The pic is of the bubble coming out of Riksbank's @ss.
23:45 January 20, 2011 by commenting
Comments are worthless, and so the fears and analogies. There is a fact here: house shortage in a on wheels economy,
09:38 January 21, 2011 by Acero
........Whats an "on wheels ecconomy"..is it an economy based on vehicle manufacture? Dont think that comment is really clear if im to be honest and worded with even less thought...sorry

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.
10:29 January 21, 2011 by Gordy
"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."

- Irving Fisher, Ph.D. in economics, Oct. 17, 1929
13:38 January 21, 2011 by Luke35711
Why wouldn't there be a bubble??!

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.
05:15 January 26, 2011 by JoeSwede
When you least expect it, that's when the bubble bursts!
22:15 February 14, 2011 by LM2010
I have heard this before ... lived in Ireland 12 years ... messages such as "soft landing" were extensively used ... same frenzy ...

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 ...
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