the 1990s. when the riksbank discusses developments in the property market, which is mainly done in the bank ’ s financial stability reports that are published twice a year, we usually divide it into two parts : the commercial property market and the housing market. commercial property is defined as such property that is leased for commercial purposes, e. g. office premises, shops and industrial premises. developments in the prices of commercial property, especially those of office premises, have tracked the economic cycle relatively well in recent years. developments in the prices of commercial property see, for instance, oecd working paper no 353 : macroeconomic policy and economic performance, 2003. are largely determined by rent developments, which in turn depend on the demand situation. the weak economic situation in recent years has contributed to dampening demand for mainly office premises. this is evident partly in the number of vacancies, which continue to rise, with the exception of the stockholm region. the subdued demand has entailed declining office rents for new leases. this has led to price falls in the office market. since 2000 real prices have dropped by 35 per cent in stockholm and by 21 and 11 per cent, respectively, in gothenburg and malmo. however, since the beginning of the year, both the rate of increase in the number of vacancies and the decline in office rents has moderated ; as a result prices have stopped falling and have stabilised in the metropolitan regions. future developments in prices and rents depend on economic developments in general, and developments in office - intensive sectors in particular. the low number of new offices, coupled with expectations of higher employment in the metropolitan regions in 2004, is likely to contribute to a reduction in the number of vacancies in the office market in the long run. given the riksbank ’ s assessment that the swedish economy will recover in 2004 and a positive outlook for the swedish business sector, with improved earnings and a lower or unchanged risk of bankruptcy, conditions are in place for a stabilisation of prices and rent levels for commercial property during the year. it is likely, however, that price increases may not materialise until further into the economic upswing. the slowdown in recent years affected to a large extent office - intensive sectors, and many premises are vacant today as a result. consequently there is a surplus of office space at present. moreover, firms today appear to be adapting their costs to more strained financial conditions, which has resulted partly in less office space per employee.

far too high. for example the force of the most recent equity market bubble gives the impression that monetary policy would have to have been tightened considerably in order to slow the increase of almost 150 per cent that was seen on the stockholm exchange between 1998 and march 2000. few central banks today say that they counter bubbles actively. but the very fact that there is such a discussion is an interesting and healthy sign. thank you. for example, there are a number of papers from the centre for economic policy research in london, ( cepr ) that raise the issue. these include monetary policy rules, asset prices and exchange rates ( discussion paper 4114, november 2003 ), boom - busts in asset prices, economic instability and monetary policy, discussion paper 3398, may 2002, and financial asset prices and monetary policy : theory and evidence, discussion paper 1751, november 1997.