A Closer Look

Ingves Says Swedish Home Prices May Drop Further as Growth Slows – Businessweek

Swedish house prices may drop further as the largest Nordic economy risks falling into a recession, according to Riksbank Governor Stefan Ingves.

“It’s not unreasonable to assume that house prices may fall a bit, or at least park at today’s level,” Ingves said yesterday in an interview in Stockholm. “The pace of lending is significantly lower now than before and we have a generally weaker economic development.”

The International Monetary Fund said in June that Swedish homes “appear overvalued with enduring price falls likely.” Property values fell 2 percent last quarter, sliding from a record that had been fueled by tax cuts, historically low central bank interest rates and the fastest economic expansion in four decades in 2010.

Robert Shiller, the co-creator of the S&P/Case-Shiller home-price index, said last month Sweden’s housing market may be in a bubble, an imbalance he warned also characterized neighboring Norway. The European Union on Feb. 14 said Sweden is under review for “increasing household indebtedness,” after debt as a share of disposable income rose to a 170 percent last year from about 100 percent in 2000.

Still, Swedish household borrowing slowed for a 15th month in December to 5.2 percent. The central bank forecast yesterday that Sweden’s economic expansion will abate to 0.7 percent this year from 4.5 percent in 2011 as exports, which account for about half of output, are hurt by the European debt crisis.

via Ingves Says Swedish Home Prices May Drop Further as Growth Slows – Businessweek.

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