“Sweden Most At Risk Of Asset Bubble” Moody’s Warns, After Taking A Look At Swedish House Prices
Since then things have only gone more surreal, and the chart below shows what has happened to Swedish home prices in recent months.
Today, six months after our most recent observations on the state of the Swedish housing bubble, Moody’s chimes in and warns that as a result of NIRP, the country is most at risk of an “ultimately unsustainable asset bubble”:
… the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent — in the form of rapidly rising house prices and persistently strong growth in mortgage credit”, adds Ms Muehlbronner. In Moody’s view, these trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability as and when house prices reverse trends. In all three countries, households are highly leveraged, and while they also have high levels of financial assets, returns on these assets will be under increasing pressure if the negative interest and yield environment persists.
And adds:
Moody’s believes that the Riksbank will find it difficult to achieve its objective of significantly pushing up consumer price inflation in a deflationary global environment, while the sustained and strong growth in mortgage lending and house prices risks leading to an (ultimately unsustainable) asset bubble.
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