Growth in danger zone

After several years of dramatic price rises, Sweden is now one of the countries at risk of a collapse in house prices, resulting in GDP growth slowing down.

House prices have risen, in real terms, by over 30% in Sweden and New Zealand in the past three years, accompanied by rising household debt. Now, according to credit rating institute, Moody’s, the two countries are most exposed to falling house prices.

Jens Magnusson, from SEB, says the warnings are correct but that the conclusions can be qualified. He points out that price increases in Sweden do not mainly come from speculation and that lending is distributed so that those with the highest incomes borrow the most.

Moody’s report also points out that Sweden’s social safety net provides a cushion for households but means greater economic exposure if things begin to get shaky.