is possible that this will lead to a slightly faster increase in prices than would otherwise have been the case. if the increased opportunities to borrow were to have a full impact on house prices, the reform could push up prices by around five per cent. the price increases would probably be highest in the parts of sweden with the higher taxation values, where they have previously paid a relatively higher tax rate. however, there are a number of factors that imply that this calculation probably overestimates the effect on prices. firstly, the government has been indicating for some time that it intended to lower property tax. it is therefore possible that house prices have already been affected to some extent by the decision. secondly, the price increases could be counteracted by the higher capital gains tax. thirdly, if households believe that the property tax will in some way be increased in the future, it is not certain that they will be prepared to increase their borrowing. as i said, it is not easy to measure the overall effects of the changed taxes. this is a subject which i believe we will have reason to discuss further in the future. in the slightly longer term, however, developments in indebtedness and also property prices will slow down. quite simply, it is not sustainable in the long run for households to allow their debts to grow more rapidly than their incomes. households would ultimately be unable to pay their loans. in the long run it is more probable that indebtedness and house prices will increase roughly at the same rate as nominal growth in the economy. this type of adjustment to more restrained growth rates will normally occur smoothly, as households begin to feel that their finances cannot tolerate a higher level of indebtedness. if there is an overly sharp correction, it could lead to weak growth in the economy for a long period of time. in this case it would also have effects on inflation. given these consequences, it is not reasonable to entirely ignore the risks with such rapid growth in house prices and loans. there may also be justification for taking these factors into account when we make our monetary policy decisions. to contribute to some extent to a smoother adjustment, we have therefore chosen on a couple of occasions to raise the interest rate slightly sooner than planned. this method of reasoning was also one reason why i entered a reservation against the decision to keep the repo rate unchanged at the most recent monetary policy meeting at the beginning of may. i advocated raising the repo rate by 0. 25 percentage points

. however, this is merely a question of fairly marginal adjustments in the timing of our interest rate decisions. seen in a longer - term perspective, i believe that these considerations benefit stability both in the real economy and inflation. but i wish to point out that neither house prices nor household indebtedness have any independent significance for monetary policy. the important factors here are inflation prospects and developments in the real economy. concluding remarks let me summarize. in recent years we have seen prices soar with regard to both commercial property and housing. the rapid price increase has gone hand in hand with a substantial increase in household debts. at present i am not particularly concerned that these prices will lead to problems for financial stability. but this is a development that is not sustainable in the long term. house prices and household indebtedness cannot increase faster than household incomes in the long run. otherwise there is a risk of imbalances building up, which may be costly for the economy. we at the riksbank will therefore be closely watching future developments. thank you!