COMMISSION STAFF WORKING DOCUMENT In-Depth Review for Sweden in accordance with Article 5 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances Accompanying the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy
Date: 2021-06-02
Institutions: European Commission, Secretariat-General
Subjects: EU employment policy, European Semester, Sweden, coronavirus disease, economic recovery, epidemic, fiscal policy, investment policy, macroeconomics, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 2.6.2021  SWD(2021) 412 final  COMMISSION STAFF WORKING DOCUMENT In-Depth Review for Sweden                   in accordance with Article 5 of Regulation (EU) No 1176/2011 on the prevention and correction of macroeconomic imbalances  Accompanying the COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE, THE COMMITTEE OF THE REGIONS AND THE EUROPEAN INVESTMENT BANK  Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy {COM(2021) 500 final} - {SWD(2021) 401 final} - {SWD(2021) 402 final} - {SWD(2021) 403 final} - {SWD(2021) 404 final} - {SWD(2021) 405 final} - {SWD(2021) 406 final} - {SWD(2021) 407 final} - {SWD(2021) 408 final} - {SWD(2021) 409 final} - {SWD(2021) 410 final} - {SWD(2021) 411 final}  
 
 
CONTENTS 

Executive summary 

1.  Assessment of Macroeconomic Imbalances 

2.  Thematic Issue: Household debt and Housing market 

LIST OF TABLES 

Table 1.1: 

Assessment of Macroeconomic Imbalances Matrix - Sweden 

Table 1.2: 

Selected economic and financial indicators, Sweden 

Table 2.1: 

Household debt indicators, Sweden 

Table 2.2: 

Selected housing indicators, Sweden 

LIST OF GRAPHS 

Graph 2.1: 

Thematic Graphs: Household debt and housing 

Graph 2.2: 

Thematic Graphs: Household debt and housing (cont.) 

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EXECUTIVE SUMMARY 

The  2021  Alert  Mechanism  Report  concluded  that  an  in-depth  review  should  be  undertaken  for 
Sweden  to  examine  further  the  persistence  of  imbalances  or  their  unwinding.  In  February  2020, 
Sweden was identified as experiencing “macroeconomic imbalances”, in particular involving overvalued 
house price levels coupled with a continued rise in household debt. It should be noted that the context of 
the  assessment  of  vulnerabilities  in  this  year’s  in-depth  review  (IDR)  for  Sweden  is  markedly  different 
from last year. Also, the evolution of the COVID-19 pandemic, the strength of the recovery, and possible 
structural implications of the  crisis are  all still  surrounded  by high  uncertainty, requiring caution in the 
assessment.  In  general,  policy  action  over  the  past  year  focused  on  cushioning  the  impact  of  the 
COVID-19  shock  and  facilitating  the  recovery.  This  should  support  adjustment  in  the  medium  term. 
Looking  forward,  the  Recovery  and  Resilience  Plan  provides  an  opportunity  to  address  imbalances, 
investment and reforms needs.  

Main observations and findings of this IDR analysis are: 

  This IDR is informed by the 2021 spring forecast, which expects a recovery in economic activity 
in  Sweden  with  the  easing  of  the  COVID-19  crisis.  After  the  drop  of  2.8%  in  2020,  real  GDP  is 
projected to increase by 4.4% this year and 3.3% next year, allowing the economy to recover its pre-
pandemic level in 2021.  

  The private debt-to-GDP ratio increased significantly in 2020, to an estimated 217% and is set 
to  stay  high.  Household  debt,  in  particular  mortgage  debt,  grew  significantly  and  is  the  main  risk 
stemming  from  private  debt,  with  most  non-financial  corporations  generally  having  a  financially 
sound  balance  sheet.  After  equaling  176%  of  gross  disposable  income  (89%  of  GDP)  in  2019,  the 
household  debt  ratio  is  expected  to  have  reached  186%  in  2020  (95%  of  GDP).  Strong  policy 
measures supported household income throughout the COVID-19 crisis, thereby reducing the risk to 
household  finances,  including  the  short-term  work  programme  and  suspension  of  the  amortization 
requirement.  Sweden has taken some  policy  measures to  promote  housing construction and housing 
supply through investment subsidies and amendments to the building and planning act. Accelerating 
house prices, a strong economic recovery and the continued prevalence of the main structural drivers 
to  take  on  mortgage  debt  (low  property  taxes  and  mortgage  interest  deductibility  as  well  as  short 
supply of affordable housing) are expected to result in a further increase in private debt to above the 
Commission’s prudential threshold and fundamental benchmark. Mortgage growth continued apace in 
2020 (5.5% y-o-y in 2020, the same rate as 2019) in spite of the pandemic and accelerated to 6.6% y-
o-y  in  the  first  two  months  of  2021.  While  banks  are  overall  well  capitalised  and  profitable,  their 
elevated exposure to the commercial real estate market, which might be subject to structural changes 
due  to  the  COVID-19  crisis  (broader  use  of  teleworking  and  online  commerce),  warrants  vigilance. 
Moreover,  Swedish  banks  benefited  from  several  policy  measures  that  released  capital  buffers  and 
provided liquidity in response to the COVID-19 crisis.  

  After  some  moderation  in  recent  years,  house  price  growth  accelerated  in  the  wake  of  the 
COVID-19  pandemic.  House  prices  in  Sweden  have  risen  to  record  highs  irrespective  of  the 
economic fall-out from the COVID-19 crisis. Real house price growth was 0.5% in 2019 and 3% in 
2020,  and  prices  have  continued  increasing  at  an  accelerated  rate  in  early  2021.  There  is  a  risk  of 
overvaluation  as  indicated  by  house  price  developments  in  comparison  with  disposable  income  and 
house  rents.  The  very  low  interest  rate  and  a  growing  population  have  made  the  overvaluation  less 
visible  in  the  Commission’s  broader  fundamental  benchmark.  Interest  rates  are  unlikely  to  decrease 
further, though, and population growth has been skewed to  those with lower income and, hence, less 
likely to acquire a house given current prices and banks’ lending policies. Land used for construction 
has  become  an  increasingly  valued  asset  over  the  year,  and  prices  of  (semi-)detached  houses  have 
increased notably faster than of apartments during the pandemic.  

1 

 
 
 
1.  ASSESSMENT OF MACROECONOMIC IMBALANCES 

Introduction 

In  February  2020,  over  the  previous  annual  cycle  of  surveillance  under  the  Macroeconomic 
Imbalances  Procedure,  Sweden  was  identified  as  experiencing  “macroeconomic  imbalances”,  in 
particular involving overvalued house price levels coupled with a continued  rise in household debt. The 
2021 Alert Mechanism Report published in November 2020 concluded that a new in-depth review (IDR) 
should be undertaken for Sweden with a view to assess the persistence or unwinding of imbalances.  

The  context  of  the  assessment  of  vulnerabilities  this  year  is  markedly  different  from  last  year's 
IDRs, which took place before the COVID-19 pandemic. The evolution of the pandemic, the strength 
of the recovery, and possible structural implications of the crisis are still surrounded by  high uncertainty 
requiring caution in the assessment. Policy action over the past year focused on cushioning the impact of 
the  COVID-19  shock  and  on  facilitating  the  recovery.  Follow-up  to  country-specific  recommendations 
from  2019  and  2020,  including  those  that  are  MIP-relevant,  is  taking  place  in  the  context  of  the 
assessment of the Recovery and Resilience Plans (RRPs).  The analysis of policies in the present report 
was  finalised  before  the  formal  submission  of  Sweden’s  RRP.  It  is  therefore  without  prejudice  to  the 
Commission’s assessment of RRPs, which is ongoing at the time of publication of this report. 

The assessment follows a similar structure  as the IDRs that were included in Country Reports in 
recent  annual  cycles.  This  chapter  presents  the  main  findings  for  the  assessment  of  imbalances,  also 
summarised  in  the  MIP  assessment  matrix.  The  assessment  is  backed  by  a  thematic  chapter  that  looks 
more  at  length  at  household  debt  and  the  housing  market.  Spillovers  and  systemic  cross-border 
implications of imbalances are also taken into account. In addition, also assessments of structural issues 
made in previous IDRs and in the context of fiscal assessments are considered where relevant.  

Macroeconomic context 

In 2021, the Swedish economy is forecast to rebound strongly and exceed the pre-pandemic activity 
level  on  the  back  of  a  robust  recovery  in  consumer  demand  and  a  more  favourable  external 
environment. Economic activity expanded again in the first quarter of 2021 after a modest fall in the last 
quarter of 2020, consistent with the limited size of sectors heavily affected by the COVID-19 crisis. Real 
GDP growth is projected to gather pace in the second quarter and continue growing in the second half of 
2021, with private consumption set to expand vigorously as restrictions are eased and supply constraints 
in parts of the  manufacturing sector are overcome. The  strong  increase in  household consumption over 
the forecast horizon is underpinned by a progressive decline in the household savings rate, coupled with 
supportive  labour  market  trends,  moderate  inflation,  and  gains  in  financial  wealth.  Government 
consumption  is  expected  to  be  lifted  by  ample  fiscal  stimulus,  although  bottlenecks  in  the  provision  of 
health care and social services limit expenditure during the first half of 2021. Fiscal support is set to be 
scaled back in 2022, thus somewhat moderating its positive impact on real GDP growth. Exports are on 
track for a robust expansion on the back of the global recovery, supported by strong competitiveness. This 
is mirrored in a further strengthening of the current account over the forecast horizon. Investment growth 
is  forecast  to  remain  relatively  modest  given  the  strength  of  the  upturn,  as  capital  formation  did  not 
retrench strongly in 2020. 

In 2022, the level of real GDP is forecast to well exceed the 2019 level. Overall, real GDP is forecast to 
grow  by  4.4%  in  2021  and  3.3%  in  2022.The  gross  saving  rate  of  households,  which  reached  a  record 
high at the peak of the COVID-19 pandemic, is expected to fall to below the 2019 savings rate in 2022 in 
the  wake of strong recovery in private consumption. Temporary unemployment support schemes, along 
with relief measures for businesses, have successfully cushioned the labour market impact of the crisis, 
particularly in hard-hit labour intensive service  sectors. The unemployment rate  is expected to decrease 
slightly  to  just  over  8%  in  2021  and  decrease  further  to  7.5%  in  2022.  HICP  inflation  is  projected  to 
increase markedly to 1.8% in 2021, chiefly due to higher commodity prices, but to fall back to just above 

2 

 
1. Assessment of Macroeconomic Imbalances 

1% in 2022, reflecting weak underlying cost pressures. Risks to the outlook appear to be tilted slightly to 
the  upside, given the extent of excess saving among households and the opportunities for businesses to 
scale up investment in view of favourable financing conditions. 

Imbalances and their gravity 

Private sector debt has been on an increasing trend for more than two decades. Household debt grew 
the fastest in the past two decades, reaching 89% of GDP (176% of gross disposable income) at the end of 
2019. Debt of non-financial corporations grew at a  more  moderate  pace from a higher initial value and 
stood  at  115%  of  GDP  at  the  end  of  2019.  In  the  year  before  the  COVID-19  pandemic,  2019,  the 
indebtedness of the non-financial corporate sector increased by 5.7% of GDP and household debt by 4.2% 
of GDP). Private debt was 49% pps above the Commission’s prudential benchmark and 38% pps above 
its fundamental benchmark in 2019.  

The  housing  market  quickly  recovered  from  an  initial  drop  at  the  beginning  of  COVID-19,  and 
house price growth has accelerated as the pandemic continued.  Nominal house prices grew by 4.2% 
y-o-y  in  2020  (3.0%  in  real  terms),  strengthening  from  2.5%  y-o-y  in  2019  (0.5%  in  real  terms)  and  a 
decline  by  0.9%  in  2018  (real  house  prices  declined  by  3.3%  y-o-y).  Transaction  volumes  and  values 
grew by 4.7%  y-o-y and 4.5%  y-o-y respectively in 2019 following a decline by 1.7% and 0.5%  y-o-y 
respectively  in  2018.  However,  indications  for  the  number  of  transactions  are  mixed  for  2020.  The 
valuation  metrics  suggest  house  prices  were  overvalued  in  2019  against  income  and  rents  although  the 
low interest rate and population growth left house prices somewhat below the fundamentals benchmark. 

Evolution, prospects and policy responses 

The growth of private debt accelerated during the COVID-19 crisis. Consolidated private sector debt 
reached a new high of 218% of GDP in 2020 with both the debt of non-financial corporations (NFC) and 
household-related  debt  above  their  prudential  thresholds.  The  increase  reflects  the  drop  in  GDP  and 
financing  needs  of  the  private  sector  in  light  of  the  COVID-19  crisis.  NFC  debt  is  estimated  to  have 
reached 123% of GDP in 2020. In reaction to the COVID-19 pandemic, corporates drew on credit lines 
with banks to accommodate fluctuations in cash flows and liquidity in the corporate bond market. NFC 
debt  is  viewed  as  less  problematic  because  of  large  and  supportive  asset  and  equity  positions,  with  the 
exception of commercial real estate (CRE). Debt of CRE amounted to some 26% of GDP in 2019, more 
than one fifth of all NFC debt. The CRE business model is more exposed to changing business patterns 
resulting  from  the  COVID-19  pandemic  and,  following  its  earlier  reports,  the  IMF  (2021) (1)  recently 
pointed  to  the  high  exposure  of  Swedish  banks  to  CRE.  CRE  debt  makes  up  44%  of  the  total  non-
financial corporation loans of Sweden’s seven largest banks. 

Household debt stood at an estimated 94% of GDP in 2020 and grew strongly at the beginning of 
2021. Mortgage loans to households continued to grow throughout 2020, despite the strong contraction in 
economic  activity.  Credit  flows  to  households  accelerated  to  5%  of  GDP  in  2020  and  mortgage  loan 
growth  in  particular  continued  to  be  strong  in  the  first  months  of  2021.  Real  net  disposable  income 
declined  by  only  0.7%  in  2020  and  is  projected  to  increase  relatively  strongly  in  2021.  During  the 
COVID-19 crisis household income has been supported by policy measures which, among other things, 
helped cushion the impact of the COVID-19 pandemic on unemployment. The employment of members 
of households  with  fixed employment,  which tend to have higher rates of  home ownership, has overall 
remained  well-protected  during  the  COVID-19  pandemic.  Since  the  trough  of  the  COVID-19  crisis  in 
spring  2020,  involuntary  savings  and  positive  wealth  effects,  from  equity  markets  in  particular,  have 
shored  up  the  aggregate  balance  of  the  household  sector.  These  factors,  coupled  with  possible  shifts  in 
preferences and low interest rates, which households expect not to change much in the foreseeable future, 
have  supported  house  price  increases  and  the  further  extension  of  mortgage  credit  in  particular.  This 
effect  is  likely  to  have  occurred  in  households  that  recently  experienced  a  rise  in  both  housing  and 
financial  wealth,  thus  increasing  wealth  inequality  and  potentially  fuelling  the  top  end  of  the  housing 
market further. 

(1)  IMF,  2021  art  IV  Sweden  Staff  Report,  https://www.imf.org/en/Publications/CR/Issues/2021/03/24/Sweden-2021-Article-IV-

Consultation-Press-Release-and-Staff-Report-50303 

3 

                                                           
1. Assessment of Macroeconomic Imbalances 

House  prices  in  Sweden  have  risen  to  record  highs  irrespective  of  the  economic  fall-out  from  the 
COVID-19 crisis. Real house prices have on average grown faster than disposable income over the past 
25  years  as  supply  fell  short  of  demand  in  particular  in  the  fast  growing  metropolitan  regions.  The 
increase  of  about  200%  over  this  period  outpaced  house  price  rises  in  most  other  EU  countries.  After 
some  moderation  in  recent  years,  house  price  growth  has  picked  up  again  in  the  course  of  2020  and 
accelerated  further  in  early  2021.  There  is  a  clear  risk  of  overvaluation  as  indicated  by  house  price 
developments  in  comparison  with  disposable  income  and  house  rents.  The  very  low  interest  rate  and 
increase in population have made the overvaluation less visible in the Commission’s broader fundamental 
benchmark.  Interest  rates  are  unlikely  to  decrease  further,  though,  and  population  growth  has  been 
skewed  to  those  with  lower  income  and,  hence,  less  likely  to  acquire  a  house  given  current  prices  and 
banks’ lending policies 

Strong policy action to cushion the economic impact of the COVID-19 pandemic supported housing 
demand  and  ultimately  house  prices.  Both  direct  income  support  and  other  measures  supported  the 
housing market. Several policy actions in addition to very low policy and mortgage interest rates worked 
to reduce the cost of house ownership. These included the suspension of the  amortisation requirement, a 
higher ceiling and abolished standard income for deferred capital gains tax, reduced liquidity constraints 
in  the  financial  system  (liquidity  support  including  covered  bonds  purchases,  release  of  the 
countercyclical  capital  buffer,  temporary  easing  of  liquidity  coverage  ratios,  encouraging  suspension  of 
dividend  payments).  Health  restrictions  constrained  spending  and  increased  savings  at  a  time  when 
preferences likely shifted to larger living spaces due to increased telework. 

However,  limited  policy  steps  have  been  taken  to  lower  housing  market  imbalances.  The  Swedish 
authorities have taken some measures to promote housing construction and housing supply, increase the 
supply  of  buildable  land,  to  increase  residential  mobility  and  to  improve  the  functioning  of  the  rental 
market.  These  include  an  intensification  of  the  investment  support  for  rental  housing  and  housing  for 
students and amendments to the building and planning act. Several inquiries have been launched to ease 
administrative procedures or liberalize rent setting.  

House  price  growth  is  expected  to  slow,  but  structural  factors  fuelling  house  prices  such  as  a 
favourable tax treatment and a regulated rental market remain in place. As financial conditions are 
set  to  tighten  gradually  with  the  projected  recovery,  while  policy  stimulus  from  fiscal  and  financial 
supervision would be scaled down, house price growth is expected to reduce. Still, distortions remain in 
place  with  a  continued  tax  bias  favouring  increases  in  household  debt  and  supporting  house  prices. 
Moreover, the rental market still offers limited alternatives to the to-buy market.  

The housing market and private debt risk metrics are skewed by the strong policy response to the 
COVID-19 pandemic. The labour market and household income have received strong support from the 
Swedish  government  either  directly  or  indirectly  through  the  support  given  to  employers.  In  addition, 
monetary policy has become more accommodative with a large acceleration of money growth (M1 grew 
at 15.3% y-o-y in 2020, the highest rate in at least two decades and almost double the two-decade-average 
of 8.0% y-o-y growth) and historically low interest rates. A tapering of the global policy response poses 
risks of a lagged reaction to the fall-out from the COVID-19 pandemic, e.g. an increase in the debt service 
burden of households and postponed structural adjustments in the corporate sector to the post-pandemic 
situation. 

The banking sector continues to have sound financial and capital ratios but have a large exposure 
to  housing  and  commercial  property  loans.  On  average  Swedish  banks  have  among  the  lowest  non-
performing  loans  ratios  in  the  EU  at  just  under  1.0%  in  the  third  quarter  of  2020  (1.0%  in  2019).  The 
return  on  equity  of  banks  dropped  from  10.6%  in  2019  to  0.9%  in  the  first  quarter  of  2021  as  the 
COVID-19  crisis  unfolded  before  veering  back  to  3.0%  in  the  second  and  5.3%  in  the  third  quarter  of 
2020. Swedish banks benefited from several policy measures in response to the COVID-19 crisis, notably 
liquidity  support and the release  of the countercyclical capital buffer,  which  was lowered from 2.5% to 
zero  on  13  March  2020.  However,  bank  balance  sheets  remain  heavily  skewed  towards  housing  and 
commercial property loans. These are exposed to the risks described above. 

4 

1. Assessment of Macroeconomic Imbalances 

Overall assessment 

Vulnerabilities  associated  with  household  debt  and  the  housing  market  remained  visible 
throughout  the  COVID-19  pandemic.  Household  debt  increased  in  2020  and  credit  growth  to 
households strengthened throughout the year. The housing market quickly recovered from an initial drop 
at the beginning of COVID-19 and house price growth has accelerated as the pandemic continued, further 
stretching valuations. 

Rising  house  prices  and  debt  from  already  elevated  levels  contrast  with an  economy  that  has  not 
fully  recovered  and  in  which  policy  support  still  stands  to  be  unwound.  In  an  adverse  scenario,  a 
large  and  disorderly  correction  of  house  prices  would  lead  to  a  negative  interaction  between  credit  and 
economic growth. This could spill over to other countries in the region through the financial system. 

Policy  measures  are  under  implementation  but  have  not  sufficiently  addressed  housing  debt  and 
house  price  imbalances.  Policy  action  has  been  limited  although  the  inquiries  raise  expectations  for 
future  policy  changes  in  particular  for  the  supply  side  of  the  housing  market.  The  overall  policy 
framework  still  provides  an  incentive  for  debt  accumulation  feeding  into  house  price  increases.  Policy 
gaps remain for housing-related taxation and for the functioning of housing supply and the rental market. 

5 

1. Assessment of Macroeconomic Imbalances 

Table 1.1: 

Assessment of Macroeconomic Imbalances Matrix - Sweden 

Table (continued) 

(Continued on the next page) 

6 

   Gravity of the challenge Evolution and prospects Policy response Imbalances (unsustainable trends, vulnerabilities and associated risks) Private debt   Sweden continues to have one of the highest levels of private debt in the EU, at 204% of GDP in 2019. High private indebtedness increases the country's vulnerability to macroeconomic shocks, as subsequent deleveraging may lead to sharp corrections in consumption and investment.  Household debt is a particular concern; it stood at 176% of disposable income and 89% of GDP at the end of 2019 (about 20 percentage points above the Commission's prudential benchmark, and 15 percentage points above the fundamental benchmark).  Households have good repayment ability and assets, but the distribution of debt and assets is uneven and a large part of household assets is exposed to liquidity and/or market risks. Household debt has grown at a nominal rate in the range of about 5 to 8 % per year since the start of this decade, significantly outpacing GDP growth. As the rate of credit growth by monetary financial institutions to households slowed somewhat in the course of 2018, the household debt ratio stabilised at around 176 % of disposable income and remained at that level in 2019. However, the Riksbank projects that household debt will start to rise again to over 190 % of disposable income by 2022.  The amortization requirement was suspended in April 2020 in response to the pandemic and the related economic crisis. The suspension will expire in September and the FSA has announced that it will not be renewed, thereby reintroducing the amortization requirement again in September 2021. Policy gaps remain regarding the incentives to take on mortgage debt. The full and unconditional tax deductibility of mortgage interest payments and the low ceiling on recurrent property taxation have not been addressed.    Non-financial corporate debt is relatively high compared to other EU countries, but it is matched by the high value of corporate assets and significant equity cushions. It mainly reflects a large share of international companies. Exposure to external financing is high. Banks’ elevated exposure to the commercial real estate market, which might be subject to structural changes due to Covid-19 (broader use of teleworking and online commerce), warrants vigilance. The corporate debt-to-GDP ratio has started to rise again after a period of 'passive' deleveraging. The ratio stood at 122% of GDP in 2020, up from 115% of GDP in 2019. Relative to gross financial assets debt declined from 80% to 75%.     Banks are well capitalised, non-performing loans remain among the lowest in the EU, and profitability is among the highest. These indicators somewhat mitigate, but do not fully offset, risks stemming from high private sector indebtedness. The reliance of Swedish banks on wholesale funding could amplify the impact of a sharp housing adjustment. Banks are increasingly exposed to the real estate market: loans to households and non-financial corporations holding real estate have increased further, and constitute about four fifths of the major banks' total domestic lending, around three quarters of which is mortgage loans to households. Also, the exposure to the commercial real estate market including through construction firms has increased. The countercyclical capital buffer was lowered to 0% in response to the crisis. Several other policy actions, including quantitative easing an liquidity support, helped in particular in the first, acute phase of the crisis.    Swedish banks serve a large share of the market in the Nordic-Baltic region, thus representing a source of possible spillovers in the event of sudden deleveraging needs.  At the same time, the major bank's loan-to-deposit ratios remain among the highest and leverage ratios among the lowest in the EU.  Housing sector   In spite of moderation in recent years, Swedish house prices continue to appear significantly overvalued. Price-to-income and price-to-rent ratios were about 36-53 % above their long-term average as of end-2020. A model-based estimate suggests prices are slightly below fundamentally justified levels (but this partly reflects House prices have grown almost steadily over the last 20 years. After peaking at 12 % in 2015, real house price growth started tapering out, slowing to 7.4 % in 2016 and 4.8 % in 2017, and decreasing by 3.3% in 2018. In 2019, house prices have broadly stabilised and in 2020 they had recovered to stand 3.0% higher than a year earlier. The authorities have taken several measures. Demand side measures amount to the suspension of the  amortization requirement and raised ceiling on deferred capital gains from SEK 1.45 million to SEK 3 million in combination with the abolishment of the interest payments on the amount of the capital gains deferred. Supply side measures taken have been the  
 
   
 
 
 
1. Assessment of Macroeconomic Imbalances 

Source: European Commission Services 

7 

  exceptionally low interest rates and population growth). These valuation gaps are among the highest in the EU. The overall valuation gap stood at 28.4% at the end of 2020. High house prices are driven structurally by a combination of structural bottlenecks to housing supply, especially in the main urban areas, combined with favourable tax treatment of home ownership and mortgage debt. Overvalued house prices combined with a large mortgage debt stock entail risks of a disorderly correction and adverse consequences for the real economy and potentially the banking sector. In spite of earlier moderation, prices remain higher than seems justified based on fundamentals, implying risks of a disorderly correction. The latter could be triggered by, for instance, an external shock or a rapid rise in mortgage interest rates. Housing investment has rebounded sharply over the period of 2013-2017 years, but construction output has started to decline in 2018 in the wake of the house price falls, with further moderation in 2019 and 2020. New housing supply still does not meet overall projected needs irrespective of recent price increases and the strong increase in the value of built land, at a pace above that of the dwellings, suggests buildable land is in scarce supply.  investment support for rental housing and housing for students, amendments to the building and planning act. Several inquiries have been launched with an aim to ease administrative procedures or to liberalize rent setting.  However, policy gaps remain, in particular regarding complex planning and building regulations, revision of municipalities' incentives to support new construction, weak competition in the construction sector and the high level of rent control.   Main takeaways  Sweden is characterised by important sources of stock imbalances in the form of high household debt associated with elevated house prices, which represents a risk as it exposes Sweden to potential adverse shocks and a possible disorderly correction with harmful implications for the real economy and the banking sector and possible spill-over effects to countries with a strong presence of Swedish banks.  Household indebtedness has increased at a rate of 5-8% per year in nominal terms. Household indebtedness as share of disposable income has increased in 2020 and is likely to continue increasing going forwards. After the correction and stabilisation over 2017-2019, house prices have gradually recovered and are set to increase further to above levels that appear overvalued.  Policy measures have still not sufficiently addressed housing debt and house price imbalances. Irrespective of policy actions and the inquiries started, the overall policy framework still provides an incentive for debt accumulation feeding into house price increases. Still policy gaps remain for housing-related taxation and for the functioning of housing supply and the rental market.     
 
 
Table 1.2: 

Selected economic and financial indicators, Sweden 

1. Assessment of Macroeconomic Imbalances 

(1) NIIP excluding direct investment and portfolio equity shares 
(2) domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU 
foreign-controlled branches. 
(3) The tax-to-GDP indicator includes imputed social contributions and hence differs from the tax-to-GDP indicator used in the 
section on taxation 
(4) Defined as the income tax on gross wage earnings plus the employee's social security contributions less universal cash 
benefits, expressed as a percentage of gross wage earnings 
Source: Eurostat and ECB as of 2021-05-05, where available; European Commission for forecast figures (Spring forecast 2021) 

8 

2004-072008-122013-182019202020212022Real GDP (y-o-y)3.80.71.41.4-2.84.43.3Potential growth (y-o-y)2.71.81.31.81.01.41.6Private consumption (y-o-y)3.31.72.61.2-4.73.85.5Public consumption (y-o-y)0.51.40.60.3-0.55.0-1.9Gross fixed capital formation (y-o-y)6.9-0.54.0-3.10.62.03.6Exports of goods and services (y-o-y)7.70.83.34.8-5.27.84.4Imports of goods and services (y-o-y) 7.51.24.21.3-5.86.83.7Contribution to GDP growth:Domestic demand (y-o-y)3.21.01.4-0.2-2.13.52.8Inventories (y-o-y)0.1-0.10.1-0.1-0.80.20.0Net exports (y-o-y)0.5-0.1-0.11.60.00.70.5Contribution to potential GDP growth:Total Labour (hours) (y-o-y)0.60.70.50.50.20.40.5Capital accumulation (y-o-y)0.70.60.50.80.40.50.5Total factor productivity (y-o-y)1.40.50.30.50.40.50.6Output gap1.7-1.6-0.7-0.2-4.8-2.5-1.4Unemployment rate6.87.87.36.88.38.27.5GDP deflator (y-o-y)1.41.71.82.71.41.61.8Harmonised index of consumer prices (HICP, y-o-y)1.31.90.81.70.71.81.1Nominal compensation per employee (y-o-y)4.03.01.73.22.32.22.5Labour productivity (real, person employed, y-o-y)2.90.30.30.8-1.5..Unit labour costs (ULC, whole economy, y-o-y)1.12.81.72.43.9-1.60.5Real unit labour costs (y-o-y)-0.31.0-0.1-0.22.5-3.2-1.3Real effective exchange rate (ULC, y-o-y)-0.31.2-1.5-4.1...Real effective exchange rate (HICP, y-o-y)-0.80.0-2.1-3.83.13.9-0.8Net savings rate of households (net saving as percentage of net disposable income)4.710.313.216.117.6..Private credit flow, consolidated (% of GDP)12.77.87.89.911.7..Private sector debt, consolidated (% of GDP)153.3190.5196.6204.2217.2..of which household debt, consolidated (% of GDP)61.375.184.788.995.3..of which non-financial corporate debt, consolidated (% of GDP)92.1115.4112.0115.2121.9..Gross non-performing debt (% of total debt instruments and total loans and advances) (2)..0.90.9...Corporations, net lending (+) or net borrowing (-) (% of GDP)4.32.0-1.7-2.40.81.30.9Corporations, gross operating surplus (% of GDP)25.424.523.823.823.925.225.0Households, net lending (+) or net borrowing (-) (% of GDP)0.53.95.46.97.78.06.3Deflated house price index (y-o-y)10.11.59.60.53.0..Residential investment (% of GDP)3.93.74.74.74.9..Current account balance (% of GDP), balance of payments7.16.13.85.15.25.86.5Trade balance (% of GDP), balance of payments6.75.23.54.14.1..Terms of trade of goods and services (y-o-y)-0.4-0.1-0.30.70.70.00.5Capital account balance (% of GDP)-0.2-0.2-0.10.00.1..Net international investment position (% of GDP)-11.8-8.9-3.517.617.9..NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1)-21.4-22.1-18.2-7.9-2.8..IIP liabilities excluding non-defaultable instruments (% of GDP) (1)122.5153.3163.4146.2144.3..Export performance vs. advanced countries (% change over 5 years)6.5-5.8-8.6-5.38.2..Export market share, goods and services (y-o-y)-0.7-4.3-1.21.85.2-0.1-0.9Net FDI flows (% of GDP)2.32.52.51.00.9..General government balance (% of GDP)1.90.0-0.20.6-3.1-3.3-0.5Structural budget balance (% of GDP)..0.20.7-0.4-1.90.2General government gross debt (% of GDP)44.938.241.235.039.940.839.4Tax-to-GDP ratio (%) (3)46.243.543.743.743.643.443.9Tax rate for a single person earning the average wage (%) (4)30.325.424.924.524.7..Tax rate for a single person earning 50% of the average wage (%) (4)26.020.420.119.619.7..forecast 
    
 
2.  THEMATIC ISSUE: HOUSEHOLD DEBT AND HOUSING 

MARKET 

Household debt entering the COVID-19 crisis 

The  ratio  of  household  debt  to  GDP  in  Sweden  has  been  increasing  almost  continuously  for  a 
decade, and the ratio of debt to gross disposable income is amongst the highest in the EU. The ratio 
of household debt to GDP has increased from an average of 60% in the period 2003-2007 to 89% in 2019 
(Table  2.1  and  Graphs  2.1(b)).  Household  debt  liabilities  comprise  mostly  long-term  bank  debt 
(Graph 2.1(a))  and  the  accumulation  of  debt  has  been  mostly  related  to  a  dynamic  flow  of  credit 
transactions (Graphs 2.1(c)). The household debt stock in 2019, at 89% of GDP, was significantly above 
the prudential and the fundamentals-based benchmarks (Graphs 2.1(b)). The household debt to household 
gross disposable income reached 176% in 2019. 

On aggregate, the household sector  holds a significant stock of assets, with currency and deposits 
covering close to 50% of debt liabilities, but the distribution of these assets and liabilities is skewed. 
The ratio of debt to gross financial assets was roughly 27% in 2019 (Table 2.1). Household currency and 
deposits amounted to 42% of GDP in 2019 and are estimated to have increased in 2020. Non-performing 
loans have been low at around 1.5%. Non-performing loans have been low, at around 1.0%. The positive 
aggregate numbers, however, need to be nuanced from the perspective of their distribution. A significant 
share of the gross financial assets of households corresponds to insurance and pensions, while another one 
is covered by equity (including tenant-owner rights) and investment fund shares, which are typically less 
liquid  (Graph  2.1(e)). (2)  In  addition,  the  distribution  of  liquid  assets  appears  to  be  skewed  also  with 
households with the largest interest expenses having the least liquid assets. (3)   

Credit developments and repayment capacity 

Net bank lending to households in percent  of GDP increased in 2020, also given the possibility of 
payment breaks, and the output contraction. Net bank credit transactions have been overall positive in 
2020 and are increasing in 2021, adding to the stock of bank debt (Graph 2.2(a)). Most of the increase in 
lending is observed in mortgage debt, which represents the largest share of household bank debt (Graph 
2.1(f)).  A  temporary  exemption  from  amortisation  payments  was  introduced  in  April  2020  to  allow 
households  with  mortgages  greater  buffers  in  uncertain  times.  As  of  January  2021,  a  total  of  230,000 
households  in  the  banks'  mortgage  portfolios  had  been  granted  a  temporary  exemption.  In  a  sample  of 
new borrowers in 2020 of Finansinspektionen covering the major banks, roughly 9 per cent had applied 
for  and  been  granted  exemption  from  amortising  all  or  parts  of  their  new  mortgages.  For  the  new 
borrowers in the sample, the gain was on average SEK 4,500/month. (4) Given the better outlook for the 
Swedish  economy,  the  exemption  will  expire  on  31  August  2021.  The  interest  burden  of  households 
remained low in 2020, close to the average costs in the euro area (Graph 2.2(b)). 

The  household  debt-to-GDP  ratio  is  forecast  to  increase  in  2020,  owing  to  the  positive  net  credit 
transactions  and  the  negative  GDP  growth.  The  ratio  of  debt-to-GDP  of  the  household  sector  is 
estimated to increase to 95% in 2020, owing to positive net credit flows (transactions) and to the positive 
GDP growth (Table 2.1 and Graph 2.1(c)).   

Household  debt  to  disposable  income  is  also  estimated  to  increase  further,  while  the  household 
saving  ratio,  although  relatively  high,  has  not  increased  markedly.  Household  income  in  2020  has 
been  supported  by  a  range  of  government  measures  and  has  remained  fairly  stable  in  2020.  However, 
given  the  positive  net  credit  transactions,  the  ratio  of  household  debt  to  gross  disposable  income  is 

(2)  On the classification of tenant-owners rights see 

https://www.scb.se/contentassets/99af4dcf7296448db1386574e1aa6b9b/mis2014-1.pdf  

(3)  https://www.fi.se/contentassets/d1254aa424dc4ccdbd21bcc01dff44db/fi-analys-28-hushalls-tillgangar-sammanfattn-eng.pdf  
(4)  https://www.fi.se/contentassets/1f11d50883754a7da8c217457e154d46/den-svenska-bolanemarknaden-2021-summary-eng.pdf 

9 

 
                                                           
2. Thematic Issue: Household debt and Housing market 

estimated to increase by 10 pps to 186% of GDP in 2020. The household savings rate is relatively high in 
Sweden, having increased to close to 18% of gross disposable income in 2019, and increasing further in 
2020. 

New  borrowers  take  on  large  mortgages  relative  to  value  and  income,  possibly  reflecting  an 
optimism  bias  in  house  price  growth  expectations,  particularly  among  younger  generations. 
Younger generations in the housing market have not experienced severe house price declines, but rather 
mostly house price growth and steady declines in the interest rate. Graph 2.2(b) shows the realized annual 
changes  in  house  prices  and  the  long-term  benchmark  yield.  Housing  market  and  interest  rate 
developments  have been benign  for recent buyers. In particular  groups  that entered the  housing  market 
since 2005 have encountered the highest average house price increase (6.0%) and the lowest volatility in 
house prices (standard deviation of 4.7%). (5) In contrast, all buyers have experienced annual declines in 
the  nominal interest rate  of some 0.3% per annum.  As a consequence, the  younger  generation of  home 
buyers may be prone to an optimism bias. Hjalmarsson and Österholm (2019, 2020) indeed find that the 
youngest  age  groups  have  the  most  optimistic  expectations  for  both  house  price  and  interest  rate 
developments. (6)  Finansinspektionen  reports  that  new  mortgage  owners  continue  to  take  on  larger 
mortgages  with  both  the  loan-to-value  and  the  loan-to  income  ratios  increasing  in  2020. (7) 
Finansinspektionen  shows  that  new  the  youngest  age  groups  have  loan-to-value  ratios  of  84%  (18-30 
years) and 77% (31-50 years). These are much higher than for older groups. At the same time, there are 
indications that households with large loans tend to have limited liquid buffers to accommodate interest 
rate changes  while being most exposed to changes in income. (8) Already at very low levels and with a 
large expansion of the Riksbank’s balance sheet realized, nominal mortgage rates are unlikely to decline 
further and are rather likely to increase, leading to an increase in future interest payments and a possible 
decline in real house prices. 

Housing Market 

Despite the COVID-19 crisis, house price growth has accelerated over recent months, driving prices 
to  new  all-time  highs.  The  house  price  increase  and  the  increase  in  mortgage  credit  has  been  unusual 
given the decline in disposable income and the marginal decrease only in mortgage rates (Graph 2.2(c)). 
The divergence in prices for apartments and detached/semi-detached houses has also been notable. Semi-
detached and detached houses increased at their fastest rate on record according to the HOX Valueguard 
index  in  February  (20.3%  y-o-y;  average  annual  growth  rate  since  2005  is  5.8%),  whereas  apartment 
prices grew at a rate (8.0% y-o-y) just above average (7.4% y-o-y).  

Several  factors  might  explain  the  run-up  of  house  prices  and  the  divergence  between  houses  and 
apartments, but evidence is still inconclusive. Structural factors (9) have been driving up house prices 
and,  in  tandem,  household  debt  (a  non-functioning  rental  market  and  taxation  favouring  housing 
investment). As a sign of the misalignment between rents and prices, rent inflation since 2010 has been 
considerably lower than that of prices (Graph 2.2(f)). Construction has been falling behind demand for a 
number of years and slowed down considerably in 2019 (Graph 2.2 (e)). As a sign of demand, the value 
of  buildable  land  for  housing  purposes  reached  its  highest  point  since  1980  (Graph  2.2  (f)).  Additional 
factors are needed to explain the recent spurt in house prices and the divergence between apartments and 
detached/semi-detached houses. Factors that could explain part of the surge are the additional increase in 
the already high savings rate and changes in preferences. (10) In addition, the changes to the capital gains 
taxation  has  freed  up  additional  equity  for  existing  homeowners,  in  particular  for  those  having  gained 
most from earlier house price growth – possibly allowing them to advance to a detached or semi-detached 
house. The temporary suspension of the amortization requirement might have provided further support to 
housing demand. 

(5)  The lower bound of the 95% confidence interval since 2005 has been a nominal price rise of 3.1% against 0.6% for the full 

sample. 

(6)  Hjalmarsson, E. and P. Österholm (2020), “Heterogeneity in households’ expectations of housing prices – evidence from micro 
data”, Journal of Housing Economics, Vol. 50, December 2020; and Hjalmarsson, E. and P. Österholm (2019), “A micro-data 
analysis of households’ expectations of mortgage rates”, Economics Letters, Vol. 185, December 2019. 

(7)  Finansinspektionen,  The  Swedish  Mortgage  Market  (2021),  https://fi.se/en/published/reports/swedish-mortgage-reports/the-

swedish-mortgage-market-2021/ 

(8)  Finansinspektionen Analysis nr 28, “Liquid assets of Swedish households”, 21 January 2021 
(9)  See, European Commission (2020), Country report Sweden 2020 
(10)  See Riksbank’s Monetary Policy report of April 2021 for a first analysis into these drivers. 

10 

                                                           
2. Thematic Issue: Household debt and Housing market 

Valuation  gaps  had  stabilised  in  2019  but  as  the  increase  in  prices  picks  up  steam,  the  risks  of 
overvaluation re-emerge. The price-to-income gap was 31.9% in 2019 (Graph 2.2(f)), the highest in the 
EU. The number of years of income needed to buy an average dwelling is relatively high at 10 years and 
growing, and internal benchmark  metrics point  to overall overvaluation (Table 2.2. and Graph 2.2 (d)). 
Residential investment has declined from 2017 to 2029, but resumed an upward path in 2020 (Graph 2.2 
(e)) and house price growth is forecast to decline in 2021 (0.2% nominal). 

Table 2.1: 

Household debt indicators, Sweden 

(f) European Commission forecast 
(1) Benchmarks for flows (% of GDP) are estimated on the basis of non-consolidated flows.  
(2) Gross non-performing bank loans and advances to Households and non profit institutions serving households (% of total 
gross bank loans and advances to Households and non profit institutions serving households).  
(3)  Quarterly data is annualized. 
Sources:  (a) Eurostat, (b) Ameco, (c) European Commission calculations, (d) ECB. 

11 

2003-072008-122013-18201920202021f|20Q120Q220Q320Q4SourceStocksDebt, consolidated (% of GDP)(a,d)6075848995|90929395Debt, consolidated (% of potential GDP)(a,b,d)6074848991|89909091Prudential threshold (% of GDP)(1)(c)475467726868|Fundamental benchmark (% of GDP)(1)(c)586672747979|Debt (% of gross disposable income)(a,b,d)130151167176186|178181183186Interest paid (% of gross disposable income) (3)(a,b)3.93.81.71.71.6|1.61.61.5Debt (% of gross financial assets)(a,d)30.333.629.527.626.9|29.728.327.226.9Share of variable rate loans for house purchase (%)(d)61.671.979.966.861.6|Domestic  loans in forex (% of dom. loans)(d)0.10.10.10.10.1|FlowsCredit flows (transactions, % of GDP) (4)(a)5.44.74.84.45.11.0|1.11.31.21.5Benchmark for flows (% of GDP)(c)3.93.73.53.63.53.3|Savings rate (% gross disposable income)(b)7.713.115.618.520.120.4|Investment rate (% gross disposable income)(b)6.76.06.36.56.56.1|p.m. Bank HH NPLs (% of HH loans)(2)(d)1.3| 
 
 
    
 
 
Table 2.2: 

Selected housing indicators, Sweden 

2. Thematic Issue: Household debt and Housing market 

(') Forecast. The forecast of house prices is computed on the basis a housing valuation model shared with Member States in 
the context of the EPC LIME working group. The forecasts represent real house price percentage changes expected based 
on economic fundamentals (population, disposable income forecast, housing stock, long-term interest rate, and the price 
deflator of private final consumption expenditure), as well as the error correction term summarising the adjustment of prices 
towards their long-run relation with fundamentals. The source for the forecast of other variables is Ameco. 
(1) Price to income in level is the number of years of income necessary to buy an assumed 100m2 dwelling. See Bricongne, J-
C, A Turrini, and P Pontuch, 2019, “Assessing House Prices: Insights from HouseLev, a Dataset of Price Level Estimates”, 
Discussion Paper 101, European Commission, available in "https://ec.europa.eu/info/publications/assessing-house-prices-
insights-houselev-dataset-price-level-estimates_en".  
(2) Price to income and price to rent gaps are measured in deviation to the long term average (from 1995 to the latest 
available year).  
(3) The model valuation gap is estimated in a cointegration framework with nominal house prices as the dependent variable 
and five fundamental explanatory variables:  total population, real housing stock, real disposable income per capita, real 
long-term interest rate and price deflator of final consumption expenditure. See Philiponnet and Turrini, Assessing House Price 
Developments in the EU (2017) available in "https://ec.europa.eu/info/publications/economy-finance/assessing-house-price-
developments-eu_en" and revision notes presented to LIME in October 2019 and June 2020.  
(4) The average house price gap is the simple average of the price-to-inome, price-to-rent and model valuation gaps. 
Source: (a) Eurostat, (b) OECD, (c) European Commission calculations, also based on national sources, (d) ECB, BIS, (e) 
Ameco 

12 

2003-072008-122013-1720182019202020Q120Q220Q320Q4House price developmentsUnitSourceReal house price, yoy growth%(a)9.01.67.4-3.30.53.02.82.22.54.5Nominal house price, yoy growth%(a)10.13.28.5-0.92.54.24.53.33.75.3Price to income in level (1)years(b)7.58.29.710.410.210.710.610.111.210.9Valuation gapsPrice to income gap (2)%(c)-4.44.823.632.129.936.334.534.936.539.0Price to rent gap (2)%(c)-12.46.832.148.749.753.152.452.253.154.8Model valuation gap (3)%(c)-3.4-3.81.5-3.0-5.6-4.1-4.1-5.9-4.9-1.7Average house price gap (4)%(c)-6.72.619.025.924.728.427.627.128.230.7Housing creditMortgages (% GDP)%(d)40.255.763.067.969.576.8Mortgages, yoy growth%(d)12.210.14.21.33.110.1Housing supplyResidential construction - dwellings  (% GDP)%(e)3.73.74.75.24.74.9Residential construction - dwellings, yoy growth%(e)9.8-4.611.0-6.4-7.92.3Non-residential construction (% GDP)%(e)4.85.45.35.96.06.0Value added in the construction sector, yoy growth%(e)6.2-0.73.02.33.31.1Building permits, yoy growth%(a)15.8-1.821.9-16.6-10.29.5Number of transactions, yoy change%(f)5.1-2.52.9-4.8Other housing market indicatosShare of owner-occupiers, with mortgage or loan%(a)54.057.956.451.751.4 
   
 
 
Graph 2.1: 

Thematic Graphs: Household debt and housing 

2. Thematic Issue: Household debt and Housing market 

Source: European Commission Services 

13 

020406080100120% of GDP(a) Household debt liabilities by creditorLong-term bank loansshort-term bank loansloans by OFIsOther domestic debt liab.Foreigntotal consolidatedSource: Calculations based on Eurostat and ECB0.020.040.060.080.0100.0120.09899000102030405060708091011121314151617181920%GDP(b) Household debt and benchmarksHousehold debt, %GDPFundamentals-based benchmark, household debtPrudential benchmark, household debtSource: Eurostat and European Commission-6-4-202468100708091011121314151617181920y-o-y change(c) Decomposition of household debt flowsCredit flowReal growthInflationOther changesD/GDP, changeSource: Eurostat and Ameco-2-1012345051015202504060810121416182022'y-o-y                  % change%(d) Household saving rateGross household saving rate Euro Area 19 (lhs)Gross household saving rate Sweden (lhs)Real adj. gross disposable income* Sweden (y-o-y %) (rhs)Source: Eurostat-150-100-500501001502002503003504000405060708091011121314151617181920% of GDP(e) Household balance sheetsA, debt securities (F3)L, debt securities (F3)A, loans (F4)L, loans (F4)A, equity and inv. fund shares (F5)L, equity and inv. fund shares (F5)A, insurance, pensions & s.g. (F6)L, insurance, pensions & s.g. (F6)A, other accounts (F8)L, other accounts (F8)A, currency and deposits (F2)A, fin. deriv. & empl. stock op. (F7)L, fin. deriv. & empl. stock op. (F7)Net financial assetsSource: Eurostat0102030405060708006070809101112131415161718192021*% of GDP(f) Bank loans to households by typeLoans for house purchaseLoans for consumptionLoans for house purchase, EALoans for consumption, EASource: ECB BSI   
 
Graph 2.2: 

Thematic Graphs: Household debt and housing (cont.) 

2. Thematic Issue: Household debt and Housing market 

Source: European Commission Services 

14 

020406080100120140-10-505101520253006Q207Q208Q209Q210Q211Q212Q213Q214Q215Q216Q217Q218Q219Q220Q22015=100Rate of change y-o-y (%)(c) House prices and mortgage credit growthMFI loans for house purchase (y-o-y growth rate)Real House Price Index (2015=100), right axisNominal House Price Index (2015=100), right axisSource: ECB Bank Lending Survey-40-30-20-1001020304050600002040608101214161820% deviation of current price(d) House prices valuation gapsModel-based valuations gapPrice to income vs. hist. avg.Price to rent vs. hist. avg.Overall valuation gapSource: ECB Bank Lending Survey0.01.02.03.04.05.06.0020406080100120140160050709111315171921*% of GDP2015=100(e) Residential Investment and building permits Residential Building Permits - number (2015=100)Residential Building Permits - m2 (2015=100)Residential Investment (% of GDP, right axis)Source: Calculations based on Eurostat, ECB0123456709Q110Q111Q112Q113Q114Q115Q116Q117Q118Q119Q120Q121Q1% of GDP (over last 4 quarters)(a) Bank loans to households (net flows) Source: ECB BSI0.00.10.20.30.40.50.60.70.80%5%10%15%20%25%30%35%40%45%20192017201520132011200920072005200320011999199719951993199119891987198519831981(f) Land and dwellings shares in total assets and valuationsLand underlying buildings (% total assets, rhs)Dwellings (% total assets, rhs)Land/dwelling asset value ratio (lhs)Source: Macrobond/SCB. Total assets include financial and non-financial assets. -4.0-3.0-2.0-1.00.01.02.03.0-0.2-0.15-0.1-0.0500.050.10.15Annual change in 10 yr benchmark interest rate, p.p.Annual change in house prices(b) Changes in house prices and interest rates1970-19871988-20042005-2017Avg 1970-1987Avg 1988-2004Avg 2005-2017Source: Den svenska bolånemarknaden 2021