It is usually said that when global production increases by 1 unit, international trade increases by two units and capital movements by four. The increased commercial possibilities that arise as countries become more economically integrated are perhaps the greatest driving force. Another force that is driving the internationalisation process is IT. In spite of the IT crash, there is still considerable potential afforded by information technology. While IT companies have suffered badly on the stock market, the use of the technology itself does not represent a "bubble". IT has resulted in better accessibility to both customers and markets as well as to information. For example, it enables mortgage institutions to find buyers of their services in several locations without having a physical presence there. Moreover, it reduces costs for administration, given the initial costs, and this ought to lead to better conditions for consumers. Yet another driving force is the growth of international organisations such as the EU. With 13 accession countries, the EU could soon be enlarged to include 10 new members, and this is leading toward the creation of a very large and important common capital market. Contacts with our neighbours in the Baltic States and Poland will be stimulated even further through co-operation in the EU. The euro area, which is now four years old, is developing and could include a greater number of countries in the future. Another important development that has affected the financial markets is the introduction of minimum standards in a number of different areas, e.g.
The economy is now undergoing a slow recovery, driven by the normal cyclical course of events but subdued by balance sheet adjustments and geopolitical uncertainty. Balance sheet adjustments will continue, however, as there are still substantial savings imbalances between different regions of the world. At the same time, the risk of war has caused flight to safer assets and thereby resulted in low interest rates. Recently, there has been an improvement in earnings and a slight fall in credit spreads. Nevertheless, the effects of asset price adjustments on pension funds, life insurance companies and non-financial enterprises are still been felt through various parts of the economy. Should the economy follow a debt cycle in the future, there is also a risk that the currently low interest rates will lead to the implementation of projects that would be unprofitable at normal rate levels. How has housing finance in Sweden been affected in recent years by internationalisation, regulatory changes and balance sheet adjustments? Developments in the Swedish asset and debt markets have largely been the same as those abroad. Shares and commercial property have declined in value since 2000. Investment in residential property and prices of permanent single-family dwellings have risen by 8 and 15 per cent respectively for the past two years. Prices of tenant-owner apartments have also increased.