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Riksbank rejects Swedish housing bubble fears

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Riksbank rejects Swedish housing bubble fears
17:44 CEST+02:00
Sweden's central bank does not believe the country is in the midst of a housing bubble, saying in a report published Tuesday that rapidly rising housing prices are due to natural developments in the market.

The last few years have seen a rapid growth in housing prices in Sweden and there have been worries that the bubble is about to burst.

But in a report published Tuesday the Riksbank attributed the rapid growth to ‘natural developments'.

“The income development of Swedish households has been good, interest rates have fallen and the supply of properties has not increased much," the Riksbank wrote in its report.

Nevertheless, there are no indications that the market will slow down and finance minister Anders Borg showed some concern regarding recent developments in Sweden's residential property market.

“The housing market seems to have entered a more stable stage, but we will have to keep an eye on what happens in the near future,” Borg said to news agency TT.

He pointed out that certain measures already had been taken such as amortization requirements, mortgage ceilings, and some increases to interest rates.

Borg also indicated that more funding might go to the Swedish Financial Supervisory Authority (Finansinspektionen) to keep banks in order.

“We certainly have reason to take a closer look at the Financial Supervisory Authority's resources. We've found ourselves in a situation with a very good financial supervisory system and they've also have shown themselves to be ready to take tough decisions, but in an international perspective and when it comes to resources they can be seen as undersized,” Borg told daily Dagens Nyheter (DN).

According to SEB analyst Elisabet Kopelman, it would have been surprising had the Riksbank announced the existence of a housing bubble in Sweden. However, she said that the bank is concerned about developments on the housing market.

“I don't think this is going to have an effect on monetary policy in the near future. At the same time it is clear that the Riksbank will continue to monitor this closely,” she said to TT.

But the Riksbank's new report did little to assuage the fears of Bengt Hansson, an analyst at the National Housing Credit Guarantee Board (Bostadskreditnämnden).

He believes housing prices will fall by 20 percent in the near future.

“There has been a bubble for a few years now. What we are waiting for is the shock that will make prices go back to normal,” he told TT.

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