There is an economic and social crisis in Sweden, according to Bloomberg. The main reason, as the authors of the article write, is the inefficient housing market in the country, which increased social discord.

Over the past year, the Swedish economy has been strongly affected by rising inflation and rising interest rates. This, in turn, caused the worst collapse in housing prices and a drop in household consumption.

Over the past 20 years, home prices in Sweden have risen by nearly 250%—a boom in the country's real estate market driven by low borrowing costs and a shortage of rental housing. What this led to: poorer families were forced to live in cramped quarters while others, on the contrary, began buying more—ttotal mortgages rose 459% in the two decades to 2022.

Corporate bankruptcies are also on the rise, reaching their highest level in 10 years in January. Thus, construction companies have come under pressure. Sweden's housing construction rate is expected to fall to about half the level needed to keep up with population growth. And this will provoke even more tension in the housing sector in the near future.

The biggest risk in Sweden's financial system, according to the country's Central Bank, is real estate lending. The fact is that rising household debt affects everything from consumption to bank failures and losses. The bank has repeatedly called for housing and tax reforms.

“There is a risk that the pace of housing construction will slow by more than 50 percent this year,” said Nordea Bank economist Susanne Spector. “This will affect GDP, and there is a risk that other construction investment will fall as well.” “Some companies with large real estate debts and municipalities are likely to postpone projects.”

According to Bloomberg, the crisis in the housing market in Sweden has long existed, but until recently it was masked by the growing economy. Now the vulnerabilities in the system have become apparent.