SPEECH DATE:  18 September 2019  SPEAKER:  Governor Stefan Ingves  VENUE:  Business Arena Stockholm  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Housing market challenges – weighing today against tomorrow Today, I am going to talk about something that affects all of us: the housing market. Everybody needs somewhere to live, regardless of whether this need is temporary or more permanent. When the housing market functions well, people can find a home for every phase of their lives and it is relatively easy to find the kind of home they want and can afford. In addition, the development of prices is such that the differences between a person owning their home and one renting one are minor. However, in Sweden, the housing market does not work well and has not for some time. This has contributed towards rising housing prices for an extended period. And this, in turn, has led to what I consider to be an unsustainable increase in household debt and has made both Swedish households and, ultimately, Swedish banks and Sweden’s economy vulnerable. This is something that the Riksbank 1 and other actors 2 have emphasised for many years. The prolonged, steep rise in housing prices is fundamentally due to the housing market being dysfunctional for several reasons.
The solution for improving the functioning of housing provision cannot be to force young households deep into debt with all the risks this entails. There are numerous historical examples of how such a development has created problems for both individual households and society as a whole. At an aggregated level, households have relatively high savings and substantial assets. However, since 2007, there is no information on how assets and savings are distributed among households, and consequently neither on how much savings the most indebted households have. Nevertheless, there are signs that the most highly indebted households have significantly fewer liquid assets in relation to their income than households who are less indebted. 27 Better information on household wealth is something that the Riksbank has been requesting for a long time. Structural reforms are needed to manage the challenges on the housing market I am well aware that it is not part of the Riksbank's mandate to manage problems on the housing market and that many of these issues are of a political nature. However, it cannot be disregarded that the housing market is part of Sweden’s economy and thereby affects how the economy functions. The economy becomes more sensitive to shocks if households (and companies) are highly indebted and, consequently, the housing market is of interest to the Riksbank. A poorly functioning housing market affects us all in the long term.