The economists at SEB write today:
Looking a bit ahead, the rapid upturn in home prices and household debt in recent years constitutes the biggest risk in the Swedish economy. After a brief slowdown in 2008, household borrowing has accelerated and debt is now close to 180 per cent of disposable income, a high level in an international comparison. Meanwhile home prices have continued climbing in a way that diverges sharply from trends in other countries.Click on chart to enlarge, courtesy of SEB.
In the latest issues of Nordic Outlook, we have discussed these risks in detail. There are several factors underlying current developments, for example structurally low home construction, exceptionally low mortgage interest rates and strong growth in employment and income. Meanwhile, international experience indicates that as a rule, a debt expansion as rapid as that occurring in Sweden is followed by a significant correction.
So much for giddy euphoria...