“We see reform on the supply side and in the financial sector’s rules for lending, rather than in taxation,” noted Pierre Schellekens, head of the European Commission’s representation in Stockholm, at a press gathering on Tuesday.
On Wednesday afternoon, the commission revealed its recommendations for several EU member states. They encouraged Sweden to “take further preventive measures to strengthen the stability of the housing and mortgage market in the medium term”.
Proposed measures to reach that objective included “fostering prudent lending, reducing the debt bias in the financing of housing investments, and tackling constraints in housing supply and rent regulations,” the statement from Brussels said.
Sweden has a household indebtedness in proportion to household disposable income of 170 percent, a figure that shoots up to 300 percent in Stockholm, said Schellekens.
And while the commission’s Sweden office has not said that the country risks a burst housing bubble, there is concern that the current situation could pose long-term macroeconomic problems.
“We have never claimed there is a housing bubble, but high private indebtedness is a key vulnerability of the Swedish economy,” Schellekens said.
It had proved a sore point with the Swedish government last year, when the Commission last published its Annual Country-Specific Recommendations (CSRs). At the same time, high demand and low supply protected Sweden from an exaggerated boom-bust cycle.
“We are not saying it is an acute problem, as there is such high demand because Sweden doesn’t build a lot of new houses,” Schellekens said.
“Yet building more would in the long term reduce the risk of a bubble.”
Speaking to The Local on the eve of Wednesday’s recommendations, Schellekens’ team said the commission does expect some grumbling. The EU members states’ finance ministers will go over the points in detail at the Ecofin council meeting in June.
“We do stay away from nitpicking and focus only on key areas that need reform,” Schellekens said.