Swedish lawmakers agree to abolish mortgage tax deduction, disagree on timing

The Swedish housing market is Europe’s frothiest and lawmakers want to rein it in

(Getty)
(Getty)

Swedish lawmakers are ready to cut a mortgage tax deduction to rein in a runaway housing market, but disagree over when to do it.

Home prices in the Scandinavian country shot up nearly 13.2 percent in the first quarter of 2021 from the same period a year earlier, according to Bloomberg.

That’s more than the country’s European peers and globally behind only Canada — where regulators are also worried about a bubble.

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

They also agree the phase out should be gradual, to avoid a shock to the housing market like the one seen in the U.K. after it abolished its tax deduction in 1988.

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Lawmakers, however, do not agree on when to start phasing out the deduction.

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 wants a wider political deal worked out before the deduction is tackled.

At the end of the day, fully phasing out the deduction in theory would add about $2.3 billion to the Swedish government’s annual tax revenue.

Robert Boije, the chief economist for the state-owned lender SBAB, said abolishing the deduction would also bring down home prices by as much as 30 percent.

[Bloomberg] — Dennis Lynch