The Shock of Sweden's Housing Market Is Hitting the Country's Currency
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Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#2The combination of removing the wealth tax and the introduction of a 30% rebate on all interest costs for individuals have really combined to clusterfuck the Swedish housing market.
Now, the interest rebate seems politically impossible to touch, even long term and through minor transitioning. Home ownership is so important to the economy and affects so many voters, that the property owning class always must be looked after.
People have been talking about the bubble bursting for years now, but it's only in the past year or so that the decline truly has been expected. Only a few weeks ago, there was an article in a major paper about a couple who quinnied about not being able to sell their house with the expected 1000% profit (over 30+ years). How ever would they manage, once they'd sold the house, bought an apartment, and didn't have the cool million SEK to splurge on whatever people in their 70s enjoy?
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#3The relentlessly negative reporting here would be funny if it wasn't so pernicious. "risk ... backfire ... risks sinking ... worrying".
And yet they're explicitly talking about a correction. Making something that isn't correct, correct. You might think that was a good thing.
If you don't want a correction, stop pumping up bubbles. You can keep 'em inflated a long time, longer than many people can remain solvent, but if you shut out the younger generations then eventually the political calculation will change, and that change will not be in your favour. As Mark Blyth is fond of observing, the Hamptons are not a defensible position.
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#4The relentlessly negative reporting here would be funny if it wasn't so pernicious. "risk ... backfire ... risks sinking ... worrying". And yet they're explicitly talking about a correction . Making something that isn't correct, correct. You might think that was a good thing. If you don't want a correction, stop pumping up bubbles. You can keep 'em inflated a long time, longer than many people can remain solvent, but…
Entropically speaking, life on earth is also a bubble that will, at least over the really long term, correct.
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#5The combination of removing the wealth tax and the introduction of a 30% rebate on all interest costs for individuals have really combined to clusterfuck the Swedish housing market. Now, the interest rebate seems politically impossible to touch, even long term and through minor transitioning. Home ownership is so important to the economy and affects so many voters, that the property owning class always must be looked…
The interest rate deduction has been around longer than that. In 1990/1991 it was reduced to 30% from 50%.
Low interest rates, the deduction, no wealth tax and a massively reduced property tax all contributed to this bubble though.
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#6Are the regulations blocking the development? Considering the demand is so high wouldn't the supply follow by e.g. scaling vertically?
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#7As someone just bought an apartment in Stockholm two years ago I was shocked seeing that I made 50 or more percent on how much I paid for my apartment but when I checked the data there I saw not all the areas in Stockholm raised in the same time and rate. I think there were many areas got hyped and there are many old buildings which raised and if you check the data you will see the start of falling in prices is not happening everywhere. I would guess prices will continue falling for two or more years but to the point, before the scare and excitement started which raised the prices too high in a year, and then it will stabilize. There is a talk also to loosen the restriction on companies which renting apartments. I really do not think this is like US's 2008 era inflation.
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#8As someone just bought an apartment in Stockholm two years ago I was shocked seeing that I made 50 or more percent on how much I paid for my apartment but when I checked the data there I saw not all the areas in Stockholm raised in the same time and rate. I think there were many areas got hyped and there are many old buildings which raised and if you check the data you will see the start of falling in prices is not h…
I mean, buyers aren't going to be able to loan money at 1.5% interest (1% effective) forever.
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#9The combination of removing the wealth tax and the introduction of a 30% rebate on all interest costs for individuals have really combined to clusterfuck the Swedish housing market. Now, the interest rebate seems politically impossible to touch, even long term and through minor transitioning. Home ownership is so important to the economy and affects so many voters, that the property owning class always must be looked…
[deleted]
Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency
#10There are tons of things inflating house prices. The most important for Sweden are
- Deduction of interest expenses from income tax.
- Too long mortgages (100 years or more) means nominal prices are high which add to the risk
- Historically big mortgages (90, 100 or even 110% of the cost could be financed - yes negativev down payments existed in the early 2000's).
- Rent control of almost all flats, meaning no one will build places to rent, only to buy.
- Extremely low interest rates as the central bank refuses to look at housing costs and interest rates when aiming for the inflation target.
This is the recipe for disaster. Now, it's not ALL doom and gloom, a lot has actually improved. Down payments have been 15-25% for some time now, mortgages are no longer infinite, and banks are using max-multiple-of-household-income caps (typically 4-5x) to limit lending. I think the situation now is a bit brighter than it would have been if we had been hit by a big correction in 2008 (which we were not). Many would welcome a controlled price correction (say 10-15%), and it IS expected since all the above changes have yet NOT changed the prices downward, even though the pool of prospective buyers gets smaller and smaller the more restrictive lenders are. It would be very welcome to see the correction now that both domestic and global economy is decent, interest rates are low etc.