Are Housing Prices Reaching its Peak? A Study on the Housing Market in Stockholm

Peter Adamsson & Jacob Lindh

Student thesis: Master thesis

Abstract

During recent years there have been many debates concerning the housing market in Sweden, and many sources claim that there may be a housing bubble. This thesis will be limited to looking at the price development of the housing market in Stockholm, as housing prices in Stockholm have increased at a faster rate than any other city in Sweden, and housing prices are by far the most expensive in the country. The aim of the thesis is twofold. The first aim is to discuss whether the housing market in Stockholm is overvalued. The second aim is to discuss whether the price development of the housing market is sustainable in the long run. By discussing and analyzing fundamental demand and supply factors (that are major driving forces behind housing price developments) the thesis provides an understanding as to why the housing prices in Stockholm have had such high growth rates; and aids in answering the aims. The findings suggest that the housing market has developed into extremely generous conditions, which has allowed for prices to naturally appreciate. Furthermore, there are factors that suggest that the housing market in Stockholm is indeed overvalued as housing prices may have exceeded the value of the underlying fundamentals. The findings also suggest that fundamental factors are likely to change in the future in a way that will contribute to reduced pressure on housing prices. In other words, it is highly unlikely that the housing market can become even more generous, or even remain at its current state, that would allow for further housing price increases. Therefore, the thesis concludes that the price development of the housing market is not sustainable in the long run.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages140
SupervisorsFinn Østrup