Sweden weighs tax changes to cool runaway housing market





Swedish lawmakers are willing to cut tax breaks on mortgages to curb the fugitive housing market, but disagree on when to do so.

According to Bloomberg, house prices in the Scandinavian country in the first quarter of 2021 rose by almost 13.2 percent over the same period a year earlier.

This is more than that of the country’s European counterparts, and globally second only to Canada, where regulators also worried about the bubble.

There is a consensus in the Swedish parliament that the government should phase out the 30 percent tax deduction on mortgage arrears. The country’s central bank and financial regulator also support the move.

They also agree that the phase-out should be gradual to avoid a shock to the housing market, similar to the one seen in the UK after the abolition of tax deductions in 1988.

Lawmakers, however, have not agreed on when to begin phasing out the withholding.

Financial Markets Minister Asa Lindhagen of the Green Party wants to start phasing out the deduction next year, while Finance Minister Magdelena Andersson of the Social Democrats is demanding a broader political agreement before tackling the deduction.

Ultimately, a complete phase-out of the deduction would theoretically add about $ 2.3 billion to the Swedish government’s annual tax revenue.

Robert Boye, chief economist at state lender SBAB, said the removal of the deduction would also lower home prices by as much as 30 percent.

[Bloomberg] – Dennis Lynch


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