Economic growth in the UK now lags behind Sweden, however, with the latter’s economy reaching pre-pandemic levels in March thanks to a lighter touch approach to lockdown.
“We have growth of 4pc pencilled in this year, all business surveys are going gangbusters, it is a highly open economy, the manufacturing sector has done really well with rebound,” says David Oxley, senior Europe economist at Capital Economics.
“But house price gains in Sweden are causing some issues and a bit of head scratching, while affordability is pretty stretched.”
Property prices in Sweden have risen by more than three quarters in the past decade, with the cost of a single family home increasing by 17pc in the first three months of this year and flats by 8pc.
The house-price-to-income ratio, which paints a good picture of affordability, is at 150, according to data from Capital Economics. This is among the highest in the OECD and far higher than countries such as Norway, France, Spain, Switzerland, Germany, Italy and the US.
Meanwhile, Swedish households are heavily indebted. The household debt-to-income ratio is among the highest in the OECD at 164pc. In France it is 98pc and in Germany 86pc.
Compare that with the UK and the picture is not dissimilar. Household debt is high, at 122pc of income, while affordability is low, with the house price-to-income ratio at 131pc.
The average cost of a home in Britain has risen by about 38pc in the past decade and prices continue their upward pace in a frothy market, despite the backdrop of a global pandemic. It’s easy to see why people are fed up. Unlike Britain, Sweden’s national finances are in better health. Debt to GDP is low, at about 38pc, compared to 103pc of in the UK. Sweden’s big banking crisis in the 1990s put fiscal discipline at the heart of every government since.
“Any politician has had to run on a platform of fiscal discipline, we often say Sweden is more German than the Germans,” says Oxley.
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