FPI in Sweden - An economic approach to Swedish housing prices in 1996-2014

Abstract

Swedish house prices have increased substantially in recent years and this paper investigates, using OLS, if the key drivers for housing prices are the same across the nation, or if there are any regional differences. The variables used are household income, household debt to income ratio, mortgage interest rate, population in the nation, the number of housing units in the nation and inflation. The data are divided into groups based on the NUTS classification and spans the period from 1996 until 2014, a total of 19 observations for each of the eight regions and the nation as a whole. These variables are used in two rounds of OLS regressions, with the second round using the stepwise-method to remove insignificant variables and reduce multicollinearity, with a housing price index for Sweden as the dependent variable. The results imply that the drivers are the same in most of the nation, with differences in some regions. The most noteworthy differences are between the farthest south and the farthest north of the nation.