Debt chief says Sweden has financial muscle to stem any property fire sale

STOCKHOLM/FRANKFURT, July 27 (Reuters) – Sweden has the financial muscle to intervene to stem any fire sale of property from companies rushing to sell out, the head of the country’s debt agency told Reuters on Thursday.

Karolina Ekholm, Director General at the Debt Office, said the government had a light debt load and could afford to borrow more to intervene to buoy the property sector should a threat emerge to wider financial stability.

She said that if a property sell-off “ends up being something … like a fire sale … that depresses prices … to the point where fundamentally healthy real estate companies are pushed to the brink of bankruptcy … I would probably recommend some form of government intervention.”

High debts, rising interest rates and a wilting economy has produced a toxic cocktail for Sweden’s commercial property companies, with several cut to junk by rating agencies.

House prices are also down by around one-fifth since their March 2022 peak, according to the Organisation for Economic Cooperation and Development (OECD), reflecting soaring mortgage costs.

Ekholm addressed the possibility of giving credit guarantees or subsidised loans but insisted that no such step was needed yet and that it could also need the approval of parliament.

The former central bank official pointed to the government’s financial clout and that it could issue debt in either euros or U.S. dollars.

The debt office oversees government debt, provides state guarantees and manages government support for banks.

“If there are massive losses in the private sector that needs to be dealt with for financial stability reasons, the public sector has … large scope for increasing its investment,” she said.

“We’re AAA rated and so there’s a lot of interest in investing in Swedish debt,” she said. “It would have to be something that threatens financial stability in Sweden and so far we haven’t seen any of that.”

Ekholm also pointed to the scant appetite in Sweden for helping struggling property groups.

“I hope that there will be no bankruptcies but I would expect that there will be some sort of consolidation,” she said.

“I think there would be very little appetite for giving subsidies to this sector just because they face a profitability problems.”

Editing by Conor Humphries

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