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Swedish Households still optimistic on housing market

While it declined slightly in October to 50, SEB’s Housing Price Indicator continues to signal rising prices. The indicator remains near the highest levels since July 2007.

Improving labour market, rising equity prices and promises of tax cuts next year continues to fuel household optimism in Sweden. According to the survey 62 per cent of the responding households (61 per cent in September) expect house prices to rise, while 12 per cent (10 per cent) expect prices to fall. 18 per cent (20 per cent) expect unchanged prices. Households in Stockholm remain the most optimistic; illustrating that overheated housing market is an issue for large metropolitan areas, and especially the capital.

While the Housing Price Indicator indicates a continued rising trend for home prices, SEB’s experts believe that regulatory measures will at least partly offset the positive impact from e.g. low rates and an improving economy.

New measures to dampen lending

Next week, the Financial Supervisory Authority is due to present a proposal for how to increase amortisation. The aim is a regulation for banks to draw up individual but voluntary amortisation plans for new lending (or when increasing loans to existing clients). The plans should according to the guidelines from the government state both why the plan is in the long-term interest of the client and how the client is relating to the plan. Next summer, by the latest, the FSA is also due to present a proposal for countercyclical capital buffers. Although the aim for this regulation is primarily to strengthen the resilience of banks to future crisis it could also be expected to affect lending.

The FSA head, Martin Andersson, has warned that too rapid lending would be met by strict amortisation demands. However, last week Andersson said there is no sign that such actions are warranted at present. The comment came after new data showed lending growth stable at 4.8 per cent in August. Previous experience indicates that voluntary actions could be effective. For instance, 9 out of 10 households are now amortising loans above 75 per cent loan-to-value in line with the recommendations from the Swedish Bankers Association.