by A swedish kind of death
Sat Feb 12th, 2011 at 01:42:28 PM EST
Since the housing crash in the early 90ies, Sweden has had a long increase in housing prices, most markedly the last couple of years. Now it appears to finally burst.
A year ago Bostadskreditnämnden (Housing credit unit) warned that housing prices were to high and would need to decrease with about 20% (through inflation or price crash). They also warned about the cost of a bubble:
En bostadsbubbla kostar - BKN
BKN har i flera rapporter sedan hösten 2008 pekat på att bostadspriserna i Sverige är omotiverat höga. Den bedömningen står fast även i den senaste rapporten, En bostadsbubbla kostar. BKN bedömer att bostadspriserna behöver anpassas nedåt med i genomsnitt 20 %. Det kan ske snabbt, genom nominella prissänkningar, eller mera långsamt genom att inflationen urholkar nominellt oförändrade priser.
I think I quipped here at ET about the infinitesimal likelihood of any party suggesting to pop a bubble during an election. And it was not mentioned during the election, even though property taxes was a big topic and the tax base of such taxes might have been interesting.
After teh election, the warning was renewed and after some debate an interesting line-up formed. On one hand the central bank and the real estate salesmen denied that a bubble could be predicted at all. The central bank because bubbles can be known in their limited world and the salesmen because everybody knows that prices go up-up-up. On the other side was Bostadskreditnämnden, the treasury and the largest banks.
So the ceiling for large percentage of the houseprice you can borrow was lowered to the applause of the big banks. This was in October. Since then nothing much has happened, prices has continued up.
Today however, there was a news report that an unprecedented number of houses are on sale, not because more are put up, but because houses stay for sale longer (ie are not sold). (The article were I read this has apparently an unfortunatley gone offline, but I will try to find another source.)
Now the question is how insolvent our Swedish banks are. They were bailed out by the baltic taxpayers for their foreign adventures there, but I suspect that the structural insolvency of international banking means that any bank can crash.