individual households are studied. here it can be added that it was not the household sector that caused problems for the banks during the financial crisis of the early 1990s ; despite the fact that the interest ratio rose to 11 per cent in 1991 and unemployment peaked during 1993 at 8. 5 per cent. with regard to developments in house prices, the assessment is still that swedish house valuations are relatively reasonable. fundamentals such as rising disposable incomes and falling interest costs could to a large extent explain the observed price trend. the demand for housing is expected to grow more rapidly than the supply. however, developments in house prices in sweden vary considerably from region to region. prices in metropolitan regions have risen by a significantly larger amount than for the country as a whole, although prices in the stockholm region have stagnated over the past two years. there has also been a steeper price rise for tenant - owned apartments than for single - family dwellings. it is difficult, at present, to envisage any tendencies towards imbalances that could lead to a substantial fall in prices. some form of unforeseen event, such as changes in regulations or macroeconomic shocks, would probably be necessary to cause prices to fall sharply. the fact that interest rates will rise in the long term should be included in household expectations and can hardly be regarded as an unforeseen event in any economic scenario. the market for apartment buildings has also been characterised by rising prices since 1994. regulations such as those on utility value, and the system of central rent negotiations, normally leads to stable, even developments in the prices of apartment buildings. however, the conversion of rental properties into tenant - owner associations has resulted in recent years in relatively sharp price rises for apartment buildings. price developments can, of course, be affected by changed conditions such as a substantial increase in new construction or a rapid decline in demand. however, a low level of housing construction and a high demand for housing, particularly in metropolitan regions, indicates that this will not be the case. conclusion the riksbank ’ s work on monetary policy and financial stability emphasises the importance of transparency, clarity and predictability. these are also important factors in the securities markets in which mortgage institutions are active. i hope that mortgage institutions ’ own actions, coupled with the new legislation, will help to render the market for housing finance more efficient.

lars nyberg : economic activity and housing finance in sweden speech by mr lars nyberg, deputy governor of sveriges riksbank, at a conference, in frankfurt am main, 4 june 2004. * * * i would like to begin by thanking you for the invitation to come here to frankfurt and introduce “ eurocatalyst investment focus : nordic covered bonds ”. i shall start with a few words about the riksbank ’ s activities. with the objective of maintaining price stability, the riksbank conducts a clear monetary policy with an inflation target of 2 per cent one to two years ahead, with a tolerance for deviations of plus / minus 1 percentage point. in addition, the riksbank has the task of promoting a safe and efficient payment system. as part of its work on carrying out these two tasks, the riksbank publishes an inflation report four times a year and a financial stability report twice a year. the most recent inflation report was published last week, while the latest financial stability report was published the day before yesterday. for those of you that are interested in economic and financial developments in sweden, i would recommend that you read both reports. economic activity everything i mention now about economic activity and the assessment of inflation is taken directly from the riksbank ’ s latest inflation report ( 2004 : 02 ), which was presented on friday, 28 may. in the report we forecast gdp growth in the oecd area to average around 3 per cent over the coming three years. with regard to the outlook for sweden, the riksbank foresees an average annual growth rate of almost 3 per cent in the coming years. looking at inflation prospects, the rate of price increases is expected to rise in the period ahead as resource utilisation increases in sweden and abroad. however, a continuation of relatively weak labour market conditions and a favourable cost situation mean that the rise in inflation is expected to be relatively moderate in sweden. our forecast in the report is for a risk - adjusted inflation rate of 1. 1 per cent one year ahead and 1. 8 per cent two years ahead, measured as und1x inflation. swedish housing finance on 1 july this year the act on issuing secured bonds ( 2003 : 1223 ) will come into force. one of the main incentives behind the new act is to offer swedish mortgage institutions the same favourable financing opportunities that these institutions face in european countries that have already introduced similar legislation. so will this new legislation result in a new financing structure