The Daily Update - Swedish house prices

According to two of Sweden’s top bank bosses, the Swedish housing boom that has lasted a generation is coming to an end as the ever increasing leverage finally begins to bite. In the past 10 years alone the housing market in Sweden has doubled, and as chief executive of Skandinaviska Enskilda Banken has warned ‘We see red flags’ adding ‘You cannot see household indebtedness continuing to increase. Sustainability is no longer there’. In September, house prices in the Scandinavian country fell by 1.5%, the first fall in years. Along with booming house prices there has been a coinciding rise in household debt, which is amongst the highest in Europe.

However, Swedish bankers are not the first to warn about the overheating property market. As far back as 2015, the National Institute of Economic Research (NIER) a government economic agency warned that Sweden was heading for a housing bubble after prices rose 15% in the previous year. Mats Dillén, NIER Director General warned ‘Prices have continued to rise. The rate of increase is 10 to 15 percent per year and it cannot go on forever’. Of course the housing market has been supported by record low interest rates in Sweden, which were cut to a negative rate of minus 0.35% in July ’15 and again to minus 0.50% in February of 2016.

Sweden’s SVT News' economic correspondent, Jan Nylander represents a view that is echoed across Europe when talking about his view on housing. As he states ‘I think the young generation in Sweden has forgotten that we had a crisis in the early 90s and they believe that house prices will always go up and that is one of the reasons that it is so dangerous now. If everyone is expecting that prices can't go down, that they must go up, then that is a very clear sign that there is a bubble’.

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