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Sweden's Social Democrats says building new homes key to easing housing market tensions
August 25, 2014 / 11:22 AM / in 3 years

Sweden's Social Democrats says building new homes key to easing housing market tensions

STOCKHOLM, Aug 25 (Reuters) - The Swedish opposition party that is favoured to win September’s general election said that increasing the pace of homebuilding was key to easing the country’s house price boom, while possible other measures should not hit first-time buyers.

Magdalena Andersson, in line to be finance minister if the Social Democrats - as expected - win power, said a housing shortage had driven up prices and household debt levels needed immediate attention.

Swedes have piled on debt after years of low interest rates and easy access to credit and the central bank, among others, has warned of economic disruption if more measures are not taken to bring down sky-high borrowing levels.

“The most important measure to get in place is to ensure that you get building started,” Andersson told reporters.

One Social Democrat proposal is to provide monetary incentives for companies building rental flats and for municipalities building rental homes.

After decades of booming house prices, household debt levels, at over 170 percent of disposable income and seen rising, are among the highest in Europe.

Sweden has already introduced a cap on how much households can borrow - 85 percent of the purchase price - but there is widespread agreement that more needs to be done.

Andersson said that the Social Democrats - the largest opposition party and likely to head a coalition government from after the Sept. 14 vote - had not decided whether there was a need for compulsory capital repayment or whether the mortgage loan-to-value cap needed to be adjusted.

“We have no proposals about whether to change the loan-to-value cap or to introduce amortisation requirements,” she said.

She said it was important to look at measures in terms of their wider effects.

“I think it is good that we discuss this in a broad context, so that we don’t make it too difficult for younger households who don’t have parents who can support them financially to buy a home,” Andersson said.

Earlier in August, Finance Minister Anders Borg said Sweden needs to introduce requirements that would force borrowers to pay off their mortgages over time instead of paying only interest on borrowing, as many Swedes do.

The Riksbank has said a range of measures could be considered, including reducing mortgage tax breaks.

A council including the central bank, the Financial Supervisory Authority, the Debt Office and the government will meet in November to thrash out a plan to cut household debt levels. (Reporting by Daniel Dickson; Editing by Simon Johnson and Toby Chopra)

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