Ingves: Structural reforms required on the housing market

Mr Ingves began his presentation by giving the reasons for the Executive Board’s most recent monetary policy decision at the end of April. There is a high level of activity in the Swedish economy and economic prospects look good, despite the economy entering a phase of lower growth than previously. Inflation has been on target for some time, but inflationary pressures are slightly weaker than expected. The Riksbank’s forecast is for the repo rate to be raised again towards the end of the year, or at the beginning of next year.

Mr Ingves also raised the challenges in the housing market. “We have lived with problems on the housing market for a long time. Rising housing prices have led to an unsustainable increase in household debt. However, the macroprudential policy measures taken by Finansinspektionen appear to be finally having an impact with regard to dampening price developments. Nevertheless, the high level of household indebtedness remains the largest risk in the Swedish economy.”

Mr Ingves went on to talk about housing policy favouring certain groups that can make a career of it. “Those who are “insiders” in the housing market benefit from good opportunities to make money on their housing, they can make various tax deductions such as for interest expenditure and the tax deductions for home improvements. However, there are several other groups of “outsiders”, who do not have the opportunity to benefit from this and few of them can save enough from their salaries for the cash deposit needed to buy a home. This has led to an unjust system that is now being patched up with various macroprudential policy measures instead of structural reforms. To come to grips with the more fundamental problems on the housing market, it is essential that measures are taken within housing and tax policy.”