Sweden's Housing Minister says that the country needs a bigger supply of housing instead of stricter mortgage lending rules to avoid a property bubble.

“If we don’t solve the supply side then we will have a problem,” says Stefan Attefall.  “Unless we kick-start an increase in the building of homes, we will have a continued upward price pressure, so it’s important that we work with that side of things too and that’s often forgotten in the debate.”

House prices rose in Sweden during the financial crisis as unemployment increased and the economy shrank. The central bank has responded by raising rates, but these have so far had little effect on the property market.

Attefall says that he is not worried about a housing bubble forming, but that the government should keep a close eye on house prices just the same.

Sweden's housing boom lasted from 1997 to 2007, during which time house prices rose at an even faster rate than the present. In 2008 and 2009, house prices rose by a relatively modest 2.9% and 2% respectively.

Source: Bloomberg