about a year ago changed the state of the housing market. Buyers started to become more cautious and it took longer before the homes got new owners. A long period of rising prices was broken. It is described by some as deeply disturbing. I mean, on the contrary, more stable prices are beneficial. It will soften the skuldtillväxten and reduce the risks for the individual and for the economy.
Some commentators are linking the changed situation to the financial supervisory authority’s (FI’s) actions. The point is not at least on the amorteringskraven for households with large debts-to-value ratio, and – from this year – in relation to income. The thesis is that ACCESS contributed to the other hand, lower house prices, partly to shut out the young from the housing market. And that it is FI’s responsibility of housing construction is decreasing.
And that it exaggerates the importance of that rise in prices has been broken. I’ll explain why, but let me start by putting FI’s actions in their context.
the Foundation found in the FI’s mission is to counter imbalances on the credit market. The Swedish economy has developed well over a number of years. Not the least of households have benefited. Rising employment, higher real wages, lower taxes and low interest rates have provided scope for both increased consumption and high savings.
the Period when the maximum leverage and interest-only loans were the norm, and debts chased ever-higher prices is over. And it should be missing at the very least, of young people and others who want to find a new or larger home.
the economy is developing well is gratifying, for society and for the individual. But long periods of unbroken rise is not only of benefit. When the sun shines continuously, it is easy to forget that the weather can turn. In the same way, many believe that the unemployment rate can not increase, the income can not fall and interest rates will always be low. In the belief people can be attracted to – in almost the literal sense – mortgaging the future.
high demand makes prices rise, which would have made it even bigger loans to buy housing. Optimistic households can thus drive debt and house prices ever higher, in a self-reinforcing process.
Large debts, often at variable interest rates and linked to the high prices of the assets, making households vulnerable if the sun goes into the clouds and that which has not happened in a long time – or something even worse would happen. Therefore, FI in the mission to reduce vulnerability. And we have acted. FI introduced in 2010 an average to 2016, a requirements, which were tightened up in 2018. It is important to try and counteract the build-up of large debts is one of the lessons learned from the financial crisis. Countries in the corresponding position as Sweden have set up similar measures.
the FI:s measures relating to new loans and, thus, those who buy housing for the first time, including young households.
A closer examination shows that the answer is essentially no. Young households, or – more generally – the households with lower income and less savings, have always had a difficult time to buy property. But it has become more difficult in recent years, especially in metropolitan areas, depend overwhelmingly on higher housing prices. Let me clarify with numbers from FI’s bolåneundersökningar and public statistics.
Between 2012 and 2017 step the gross income of an average 25-30-year-old with 4.100 crowns. At the same time, the income that was needed to get lend to an average one in the kingdom with 4.600 sek.
Rising house prices accounted for approximately 3.900 sek of the increase and amorteringskravet of sek 120 . (Inflation and somewhat stricter kreditprövningar accounted for the rest.) Almost the entire increase in their incomes eaten up by higher prices. For the purchase of an apartment in Stockholm, needed the income increase with 7.400 sek.
This said, the prices of the 6700 sek compared with the amorteringskravets sek 190. This was enough an average income growth is not at all to neutralise the price rise. The figures also show that kreditprövningarna has only become marginally stricter. The majority of young borrowers repaid already before the FI’s requirements.
the Examples show that higher housing prices is the factor that most adversely affected the young, those who are looking for bigger home and those who need to move to a more expensive place. FI’s requirements have played a limited role.
It is for me to the thesis that FI’s actions lowered the cost of housing. First I have to say that the FI ‘ s purpose is not to influence the housing prices. Our mission with regard to risks linked to household debt. It does not prevent the FI’s requirements may have contributed to the attenuation. The effect is mainly through the borrowers not previously amortised in line with the requirements. There are groups, with slightly lower leverage ratios and, thus, in the first place other than young borrowers. As shown by the instances did the banks ‘ kreditprövningar that the young are already amortized almost in line with the requirements.
the first is the increased supply of homes centrally located. Analysis of the FI’s financial stability report, published on 27 november, shows that prices have fallen most in those counties where it had been built the most.
secondly, there is a limit to how large loans households want to and can take. It creates a kind of gravity that sooner or later, the price jumps to stop by. The power operating through the individual do not want to put how a large portion of their income on accommodation and through to the banks ‘ kreditprövningar work as they should. Consequently, it was inevitable that the price rise sooner or later would be broken. And as I pointed out at the outset That the housing market is entering a calmer phase is common.
in Addition, it is unsustainable if the construction requires that the prices are so high that households, in order to buy new homes have to mortgage themselves more than they want to and should. Unsustainable is also the right words to describe business models based on buyers of new homes must believe that prices constantly rise. It is clear that the buyers now not in the same extent to take on the price risk by buying expensive homes long before they are built. Also it must be viewed as healthy.
FI’s action formalizes the natural conditions in a well-functioning mortgage market. The period when maximum leverage and interest-only loans were the norm, and debts chased ever-higher prices is over. And it should be missing at the very least, of young people and others who want to find a new or larger home.
in Order to help them the required measures on the residential and construction market. A better functioning rental market and cheaper construction should be the focus. It should be combined with the lower interest deductions, and changes in the taxation of housing that increase mobility.
Reforms in these areas would be beneficial for both those looking for housing and the economy. Return to skulddrivna increases in house prices, would it not.
