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IMF warns of Swedish house price decline

TT/The Local/pvs · 1 Jun 2011, 11:56

Published: 01 Jun 2011 11:56 GMT+02:00

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"We estimate that house prices have peaked, and we believe that interest rates are set to continue to rise. Therefore house prices will probably continue to fall," said Peter Doyle at the IMF said at a press conference on Wednesday.

The IMF warned in its annual assessment of the Swedish economy, that Swedish house prices are in line for a fall even if the eurozone debt crisis does not impact on growth.

With this scenario in mind, the IMF has cautioned against an aggressive tightening of monetary policy.

Peter Doyle also said the situation in the Swedish financial sector during the financial crisis was much worse than most people realized then. He likened the situation of an impending heart attack which required extensive coronary artery surgery.

"It is important that the Swedish people understand how serious the situation was."

Story continues below…

One of the reasons for the problems, the IMF explained, is that the Swedish banking sector is different from many other countries in that it is larger, more concentrated, dependent on short-term financing, and has extensive operations outside of Sweden.

The IMF also assessed that the Financial Supervisory Authority (Finansinspektionen - FI) had difficulty managing its task, primarily due to lack of resources.

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

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Your comments about this article

13:09 June 1, 2011 by Luckystrike
Remember that the IMF is a business at the end of the day. They lend money at a extremely high interest rate (25-30%).

It is in their best interest for a eurozone country's economy to crash.

My point is, read these reports from the IMF with a pinch of salt. Dont panic, do your own research.

The fact is, is that the demand is still way, way bigger than supply in Sweden, mostly in Stockholm. Add higher interest rates and more strict borrowing requirements. There is no bubble burst coming anytime soon.
18:57 June 1, 2011 by reason
"Add higher interest rates and more strict borrowing requirements."

That is rather an argument for why prices might actually fall or at least stop growing. If it is harder and more expensive to borrow, prices have to stay closer to what buyers can actually earn (in my opinion a good thing, or we end up renting from the banks rather than owning our homes). The bubble analogy is old and never was very good or useful, so I won't call it a bubble. But I wouldn't be surprised to see a bit of a drop in prices or at least a stagnation.

"Remember that the IMF is a business at the end of the day."

Incorrect. It's not a business either at the beginning or the end of the day. It's an intergovernmental organisation which is something quite different.
13:34 June 2, 2011 by Luckystrike
" Incorrect. It's not a business either at the beginning or the end of the day. It's an intergovernmental organisation which is something quite different. "

Ignorance is bliss ha!
14:11 June 2, 2011 by Frank Arbach
'Swedish house prices to decline'..?

Lovely!! I've spent loads renovating my home - now we'll never get would-be buyers to cough up the dosh

I suppose at the end of the day its all a question of relativities. I don't mind selling my house for 1 Swedish kronor if it meant I could buy the Kungliga Slottet for 100 SEKs. Lol
17:28 June 2, 2011 by cmbsweden
If true, it is only an issue if you are selling. If you are buying then it is a buyer's market, if you factor in interest rates.

House price bubbles are really only a danger to those who paid way too much to begin with for their home and having trouble making their mortgage payments or for those looking to sell or those who are trying to "flip" houses (buy it in order to sell it quickly for profit) because that is pure speculation. If you bought your home intelligently (in other words you can afford the home you bought) then prices up or down are not a factor.

The interest rate situation can be a factor for any person, regardless of the situation
19:41 June 2, 2011 by Grokh
the house prices in sweden have doubled in the last 10 years, its prolly a good thing its going down since no one seems to get a damm rent apartment anywhere in sweden and the houses cost 1million kronors, while the rent apartment lines take up to 3 years.
09:36 June 3, 2011 by donfabricio
another coded message from the power behind the scene, come and play your part in Libya or we'll crash your economy.
19:26 June 3, 2011 by astra2thor6
I worry that the current high level of personal indebtedness can only be sustained while interest rates remain low, but I remember when Swedish interest rates were 14%; house and apartment prices plunged!
07:59 June 4, 2011 by bjorkon
"The fact is, is that the demand is still way, way bigger than supply in Sweden, mostly in Stockholm. Add higher interest rates and more strict borrowing requirements. There is no bubble burst coming anytime soon."

Hmm .. where does that demand come from? If you don't have the money (because the bank won't lend to you, or you can't afford the higher payments the interest rates dictate) then you ain't demandin' nuffin. Every bubble pop is preceded by people spouting this sort of nonsense.

It's always about the money..
21:23 June 7, 2011 by hjoian
IMF are not a credible source. All the time banks will lend and people can afford repayments,house prices will continue to rise. As long as the Swedish banks are sensible as to who they lend to,there should not be a problem. Irresponsible lending,from banks, and at the suggestions of IMF,are what causes the biggest F-ups for everyone.
22:37 June 10, 2011 by Brucelee@stockholm.sweden
@ Luckystrike

I agree, Luckystrike you are smart in this way. It is true that IMF and WorldBank are tools of the United States and its Dollars. They all lost their trust and should be closed for good.
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