Regulatory Alerts2016-09-22
Added · Updated
Warning of the European Systemic Risk Board on medium-term vulnerabilities in the residential real estate sector of Sweden
The European Systemic Risk Board identifies medium-term vulnerabilities in Sweden's residential real estate sector as a source of systemic risk to financial stability. The warning highlights rapidly growing and overvalued residential real estate prices alongside high and increasing household indebtedness, particularly among groups with mortgage debt averaging four times their annual disposable income. The Board notes that while Sweden has implemented measures such as an 85% loan-to-value limit and amortisation requirements, these may not be sufficient to fully address the build-up of vulnerabilities. The document warns that adverse dynamics in real estate prices and household consumption could threaten the banking system and generate cross-border spill-overs within the Nordic-Baltic region.