Double-digit gains in home prices have not deterred Swedish buyers. New research from the International Monetary Fund suggests that concern is mounting over the Nordic country’s high household debt. House prices in Sweden were 18% higher in October than the same month a year ago, led by 20%-plus year-over-year gains in apartment values in Stockholm and Gothenburg, the two largest cities. Meanwhile, household debt in Sweden reached 176% of disposable income in September, a high ratio when compared to other European countries such as Spain and the United Kingdom. This is partly explained by a tax system that strongly favors debt-financed home ownership, which increased 8% from 1990 to 2014, according to the IMF. Real interest rates in Sweden stand at 1.5 percentage points below their average since 2000. Rising prices are fueled by strong demand, especially in urban areas, where the low level of construction is particularly pronounced. According to the Stockholm Chamber of Commerce, there is a deficit of around 120,000 homes in the capital region. The non-profit organization Housing Europe estimates that up to 276,000 dwellings would be needed in Sweden to match the population increase. Based on the current outlook for new development, the housing stock will add 20,000 units each year from 2017 to 2019. However, it might not be enough to contain the rise in home prices, which are expected to drop only 1.4% by 2020. View the full listing pictured above.Read the full IMF working paper here.
Write to Andrea López Cruzado at andrea.lopez@dowjones.com