Why northern Europe is so indebted (2021)

This is such a non-story, mainly driven by the fact that home ownership in Nordic countries is ubiquitous (80% of Norwegians OWN their primary dwelling) combined with the high medium incomes resulting in those houses being quite expensive. I’d really recommend not trying to draw any deeper conclusions from this data.

Edit: by “own” I mean “have a non-paid off mortgage”, the tax on net wealth here actually disincentives paying off a mortgage early vs “leveling up” your debt/house.

Re: Why northern Europe is so indebted (2021)

#7

Post by smcl » Mon, Mar 20, 2023, 10:03 PM UTC

Not Northern Europe, but Czech Resident here. There has been an explosion in house prices here, a truly wild one. I bought my place for 3.6m CZK about 7 years back and according to a recent valuation practices is "worth" nearly double this now. It is fucking wild, and tbh I kind of hate it.

Re: Why northern Europe is so indebted (2021)

#8

Post by sohtym » Mon, Mar 20, 2023, 10:06 PM UTC

Seems a bit general. Sweden is very much in debt because of the housing market. 15 years ago there were little regulation. You could get a 100 year mortgage with a variable rate and no money down. At the same time the government sold large amounts of public housing at below public market rate. Interest rates went from ~4% to ~1.5%. With no wealth or property taxes, but with tax deductions for renovations and interest rate payments. Most apartment buildings are co-ops, where the co-op have loans as well. Gradually there have been more regulation, but most still have variable rate mortgages which they are personally liable for and with no real a way to declare bankruptcy. Now interest rates will probably reach 4% again so hang on I guess.

Re: Why northern Europe is so indebted (2021)

#9

Post by cmrdporcupine » Mon, Mar 20, 2023, 10:09 PM UTC

The explanation here still wasn't clear to me after several readings. They're showing that a bias towards social spending on the elderly was co-related with higher overall debt. But I'm unclear on their explanation.

Given they're talking about mortgage debt in particular, would like to see plotted against housing prices.

Especially curious if certain kinds social spending helps shore up baseline housing prices by increasing aggregate spending, by putting more cash in the system but also by reducing foreclosures/bankruptcies.

And most importantly, if seniors can stay in their homes longer -- because of adequate pension systems -- that means less houses dumped on the market. "Selling the family home so I can afford to retire" (aka downsizing) is a pretty common maneuver in the Anglo-American economies [where pensions are dubious]. When all the baby boomers finally liquidate their real estate assets, it should be interesting to see what happens to housing prices. in North America

Re: Why northern Europe is so indebted (2021)

#10

Post by matsemann » Mon, Mar 20, 2023, 10:09 PM UTC

When you live in a stable society and have gotten a free education and a nice job, it makes sense to get a loan to buy a place to live and start paying a mortgage instead of debt.

Contrast with a society where the average education might be lower, less people having a stable job in a slow labor market, and if you lose your job there is no safety net. Hard to get a loan, so end up renting for longer, and in turn have a lower average debt.

Debt can be a proxy for a well working society, as you have the means to invest in your future, not just putting out short term fires.