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Any Chance of a Swedish housing price bubble?

Friday, 15 February 2013
Swedish house prices have taken some beating in the past few months such that there was beginning to the fears that the so-called over-inflated Swedish house prices could become a bubble. It turns out that such might not be the case.

A new report from a study commissioned by real estate companies JM , PWD Housing, NCC, Skanska, and Veidekke as well as the Swedish Association of Architects, show that the Swedish housing market will remain strong despite aspects of uncertainty.
According to the Swedish business daily, Dagens Industeri, which reported on the findings, consulting and research firm Evidence, was commissioned by the above-mentioned companies reviewed the arguments for and against a housing bubble.

Evidence has looked at a number of factors such as household income, expenses and debts and the study specifically examined trends in Stockholm. The overall conclusion came that there is no Swedish housing bubble., reports Dagens Industri.

"Population growth, income growth and falling interest rates explains to a large extent the change in house prices since the end of the 1980s, "the report says.

The report devotes a special section on household debt, which states that there are a number of factors other than housing prices that fuelled the debt.
One is linked to great migration to the various Swedish metropolitan regions. that even if house prices remain the same in a number of years, the average house prices in the country will still increase.

Another factor that increased indebtedness is that construction companies have changed their production systems, from rental apartments to a larger share condominium.
"This means that a larger share of the financing of new housing is via households rather than by housing companies. This contributes to the debt in the household sector growing faster now than during periods in which housing finance was done either with state funds or by borrowing in the rental housing business, "the report says.

Evidence also takes up the large number of conversions from rental to condominium. Only in Stockholm, which has the country's highest housing prices, has more than 90,000 rental units were converted to condominiums since the mid-1990s.

"Rising debt in the form of home loans does not automatically mean that households have indulged in any 'mortgages party' but rather is a consequence of the economic and demographic trends and political decisions. "

Evidence overall assessment is that there seems to be no housing bubble in Sweden. On the contrary, analyst expects a stable modestly rising prices in Stockholm the next three years.
by Team

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