Sweden's government is ready to step in to stem the fallout from a property rout if tumbling prices cause a wider crisis - a potential harbinger of trouble across Europe.
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.
Concerns about the property sector are already weighing on the currency, while investors are wondering if Sweden is only the first domino to fall in Europe.
Sweden and Germany are among the worst affected by a widening property slump on the continent, according to Eurostat.
Earlier this week, the OECD warned of 'financial stability risks' in Sweden, pointing to banks' heavy lending to property companies and homeowners, most of whom have floating-rate mortgages that move in lock-step with rising interest rates.
Property is the lynchpin of the Swedish economy, making up 80 per cent of household debt. Weighed down by home loans, Swedes are twice as heavily indebted as Germans or Italians.
Commercial real estate makes up 18 per cent of bank loans, according to the OECD, more than three times the level in Spain or Ireland.
Swedish officials are worried that banks could compound property companies' troubled by cutting credit, triggering firesales that would further drag down the market.
Coupled with falling property prices and rising mortgage costs, the crisis also threatens a voter backlash against a government already under pressure over a rising tide of gang violence.
