The Mismanagement of the Housing Market: A Deep Dive into Sweden’s Housing Crisis
During his tenure as the head of the Swedish central bank from 2006 to 2022, the term “mismanagement of the housing market” ironically gained prominence. The era of low interest rates sparked a housing rally, further fueled by central banks’ pandemic stimulus measures.
When Stefan Ingves took the reins as the central bank chief, the average square meter price for a condominium in Sweden was 18,000 SEK. By the time he handed over the baton to Erik Thedéen in 2023, prices had soared to nearly 43,000 SEK per square meter. Concurrently, Swedes’ indebtedness has dramatically increased, making us one of the most interest rate-sensitive populations in the world.
“We have systematically and meticulously mismanaged the housing market in Sweden for the past 80 years. There is no willingness to change that,” Ingves laments. “It’s not a single measure that is needed, but a range of different actions. Structurally in Sweden, we have lacked the energy to tackle these issues, always pushing it forward.”
He speaks of the “ins and outs.” Those inside the housing market have benefited from the structures, while those outside struggle to enter. Those on the outside do not belong to the median voters, Ingves explains.
“The median voters have granted themselves privileges in the Swedish system. And it’s very difficult to unravel and change that.”
Do the Swedish people have themselves to blame?
“Above all, it’s the old structures that those inside benefit greatly from,” Stefan Ingves asserts.
Ingves belongs to the boomer generation, which generally has a pretty good housing career behind them. To generalize, this generation entered the housing market before the deregulation wave in the 1980s, and some now own houses that have skyrocketed in value. Meanwhile, the generations that followed have found it more challenging to board the train with today’s high thresholds and housing prices.
The mismanagement of Sweden’s housing market has deep-rooted issues that have been neglected for decades. The disparities between those within the market and those on the outskirts have created a divide that is widening with each passing year. As the housing crisis continues to escalate, it is imperative for policymakers to address these systemic issues and work towards creating a more equitable and sustainable housing market for all Swedes.