Household debts and the Swedish housing bubble

2 April, 2013 at 21:11 | Posted in Economics | 1 Comment

The increase in house loans – and house prices – in Sweden has for many years been among the steepest in the world.

Sweden’s house price boom started in mid-1990s, and looking at the development of real house prices since 1986, there are reasons to be deeply worried:

Source: Statistics Sweden and own calculations

The indebtedness of the Swedish household sector has also risen to alarmingly high levels, as can be seen in the figure below (based on new data published earlier this month by Statistics Sweden, showing the development of household debts/disposable income 1990 – 2012):
householsdebts

Source: Statistics Sweden and own calculations

Yours truly has been trying to argue – for two years now – with “very serious people” that it’s really high time to “take away the punch bowl.” Mostly I have felt like the voice of one calling in the desert, and up until now neither the Swedish central bank, nor the government, has been willing to listen. Compairing the above figures with the one below (source) could perhaps give some refreshing perspective …
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1 Comment

  1. How is the age distribution of that debt? I am saying that the generation X family are looking into an abyss. Their parent were busy late 80s and 90s with self realization and divorced, now they are sitting in houses they cannot manage. It falls to the gen X family to sort out maybe 4 houses that their parent soon will be unable to manage.

    Many like me who are looking at selling several missmanaged houses in the coming years to sort out the living situation of a parent generation with hubris. No mystery what that will do with the housing prices.

    Because we have a biological bubble and that is far worse than if it just was a economic bubble.


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