Comments on: The latest bubble warning: Swedish house prices

By: Mark Wadsworth

Mark Wadsworth — Wed, 28 Oct 2009 00:48:00 +0000

“Reduced income tax and the abolished property tax have also contributed to the housing rally.”

Well, hurray for reduced income tax, but if you reduce a property tax, that can only lead to one thing …

By: Edward Harrison

Edward Harrison — Mon, 26 Oct 2009 23:49:00 +0000

I ususally follow Nationwide’s monthly surveys and they have good price-to-rent charts that show the market is still overvalued. Take a look on their site and go through the press releases and you will see the charts in the PDFs attached.

By: Christopher Pavese

Christopher Pavese — Mon, 26 Oct 2009 21:36:00 +0000

Ed – wondering if you have any specific data on UK housing along the same lines that pointed to extreme overvaluation here in the states (i.e. price-to-median household income, price-rent, etc.).

Cheers

By: aitrader

aitrader — Sun, 25 Oct 2009 20:40:00 +0000

Good points, couple of additions:

Reduced income tax and the abolished property tax have also contributed to the housing rally

Income taxes have been reduced less than 1% on average. There is still a property tax but it has been changed to a flat rate with a maximum cap of 6,000 Swedish krona (about $950 USD currently).

The property bubble is almost exclusively in Stockholm and its suburbs, which is the engine and hub of economic activity in the country. Stockholm and suburbs had a population of about 1 million folks in the mid-1990′s. It is now a bit over two million. Sweden has a population of about 9 1/2 million so this is about 20% of the country.

The Swedish banking sector is being sucked into a bubble domestically due to the effective negative interest by the Swedish Riksbank. This would be foolish enough on its own if the major banks here didn’t also have serious risk exposure in Eastern Europe.

A double whammy, where Eastern Europe devalues and defaults skyrocket and domestic defaults climb as well, is a distinct possibility. I’d say we are looking at mid-March when something like this could come to a real head. Odds-wise I give it 50-50.

By: Christopher Pavese

Christopher Pavese — Sun, 25 Oct 2009 19:45:00 +0000

Exactly! Couldn’t agree more. See our thoughts on gold at http://www.viewfromtheblueridge.com

By: Edward Harrison

Edward Harrison — Sun, 25 Oct 2009 19:33:00 +0000

That is the same line George Soros is now using to say he sees a dollar crash against other fiat currencies as unlikely. What happens to the dollar (or the euro or SEK) versus gold, oil or commodities is another story.

By: Christopher Pavese

Christopher Pavese — Sun, 25 Oct 2009 19:30:00 +0000

Unfortunately, the story appears to be the same across the developed world. Americans are so focused on the “demise of the dollar”, but are our western peers really any better off? I am more comfortable with the “all mighty” buck in my pocket than a “krash-prone” krona. At least are housing bubble is no longer inflating . . . nor do we have an imploding Eastern European neighbor to worry about.

If global reflation requires competitive devaluation, what is the result when all of our goals are the same? Perhaps this is a better question for Nash?

As Winston Churchill once stated, “The dollar is the worst currency, except for all the alternatives.”

By: Anonymous

Anonymous — Sun, 25 Oct 2009 18:00:00 +0000

Very true! Add to that, with (even with the tax cuts as mentioned in the article) the disposable income in Sweden is VERY low compared to other countries in Europe. Income taxes are one of the highest in the developed world (after denmark…). So, when the rates start raising we will see a double whammy on the propery market: high unemployment and people cant afford to pay their mortgages because of high rates.