Sweden’s Riksbank Deputy Governor: Too few homes are being built in Sweden 

“A better balance between supply and demand is needed on the Swedish property market.” These are the words of First Deputy Governor Kerstin af Jochnick, speaking on Thursday at property magazine Fastighetsvärlden’s seminar, Fastighetsdagen, in Stockholm.

Af Jochnick points to the need to maintain a low repo rate at present. “Global interest rates have fallen for several decades. In addition, many central banks around the world are conducting a highly-expansionary monetary policy. We must take this into account. The Riksbank‘s monetary policy has contributed to the strong economic activity we now have in Sweden and towards rising inflation. It is important that we maintain this positive trend,” says Kerstin af Jochnick.

At the same time, af Jochnick points out that the generally low level of interest rates entails risks for the financial system. In particular, she mentions households’ high indebtedness. The fundamental problem, however, is that, for several years, too few homes have been built in Sweden, says Kerstin af Jochnick.

A mix of policy measures is needed to reduce the risks inherent in household indebtedness. Measures are needed to manage the problems on the housing market, as are measures to reduce households’ willingness or ability to take on debt. A gradual reduction of tax deductions for interest expenses should be considered, as should a debt-to-income limit, says af Jochnick.

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Source: Riskbank

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