The Swedish housing market has been subject to extensive attention in the media recently, and the existence of a housing bubble has been questioned. The purpose of this thesis is to analyse the Swedish housing market to investigate if there are reasons to believe that the market is overvalued. The current situation in the housing market will be compared to the United States market prior to the crash of 2007. The models that are used in the paper is the house price-to-income, price-to-rent and imputed rent-to-rent. Other fundamental factors such as rent control, household debt, interest rates, and other policies effecting the housing market will be discussed. The main findings indicate that the Swedish housing market in 2010 is overvalued, however one has to consider that there are limitations to these models such as the extra benefits of owning a house compared to renting.

The Swedish housing market has been subject to extensive attention in the media recently, and the existence of a housing bubble has been questioned. The purpose of this thesis is to analyse the Swedish housing market to investigate if there are reasons to believe that the market is overvalued. The current situation in the housing market will be compared to the United States market prior to the crash of 2007. The models that are used in the paper is the house price-to-income, price-to-rent and imputed rent-to-rent. Other fundamental factors such as rent control, household debt, interest rates, and other policies effecting the housing market will be discussed. The main findings indicate that the Swedish housing market in 2010 is overvalued, however one has to consider that there are limitations to these models such as the extra benefits of owning a house compared to renting.

Abstract The topic of an overheated housing market, in Sweden, has been extensively discussed, not least by the media. This thesis will contribute to the debate by answering the question whether a potential price bubble exists in the Swedish housing market. Years between 1984 and 2004 are analysed using conventional metrics, which include house price-to- rent and income ratios respectively, changes in the dynamics of real house prices, as well as demographic variations. The analyse continues with the use of the imputed rent, also known as the yearly cost of ownership. Moreover the fundamental factors; interest rates, indebtedness and turnover of houses are discussed. It will be concluded that the conventional measures can be misleading. The imputed rent is a superior measure since it is the true cost of ownership and it accounts for changes in important determinants of house demand, mainly the interest rate. The answer to the title of this paper is; no, house prices (in 2004) in Sweden did not appear to be particularly overvalued, neither when compared to yearly rents in the tenancy market, disposable incomes, nor when low levels of interest rates are taken into account. However, this does not rule out that house prices cannot fall in the near future. / Sammanfattning Denna kandidatuppsats behandlar ämnet om en möjlig husprisbubbla i Sverige. Sedvanliga tekniker som används vid analysering av prisbubblor innefattar användandet av proportionen mellan huspriser och hyror samt disponibla inkomster. Även dynamiken i reella huspriser och demografiska förändringar utvärderas. I denna analys jämförs åren mellan 1984 och 2004 genom att använda “imputed rent”, vilken representerar den årliga kostnaden av ägande. Även fundamentala faktorer som räntan, skuldsättningen samt omsättningen av hus undersöks. Den slutsats som uppsatsen resulterar i understryker att de sedvanliga bruken kan vara vilseledande och att ”imputed rent” är en bättre teknik. Detta eftersom ”imputed rent” representerar den verkliga kostnaden av ägande samt inbegriper viktiga avgörande faktorer, som räntan. Därför är svaret på titeln; nej, huspriserna (år 2004) i Sverige förefaller sig inte vara särskilt övervärderade, när de jämförs med årliga hyror av likvärdiga hyresrättslägenheter och disponibla inkomster, samt när hänsyn tas till den låga räntan. Detta utesluter dock inte en framtida nedgång av huspriserna.

<p>Abstract</p><p>The topic of an overheated housing market, in Sweden, has been extensively discussed, not least by the media. This thesis will contribute to the debate by answering the question whether a potential price bubble exists in the Swedish housing market. Years between 1984 and 2004 are analysed using conventional metrics, which include house price-to- rent and income ratios respectively, changes in the dynamics of real house prices, as well as demographic variations. The analyse continues with the use of the imputed rent, also known as the yearly cost of ownership. Moreover the fundamental factors; interest rates, indebtedness and turnover of houses are discussed.</p><p>It will be concluded that the conventional measures can be misleading. The imputed rent is a superior measure since it is the true cost of ownership and it accounts for changes in important determinants of house demand, mainly the interest rate. The answer to the title of this paper is; no, house prices (in 2004) in Sweden did not appear to be particularly overvalued, neither when compared to yearly rents in the tenancy market, disposable incomes, nor when low levels of interest rates are taken into account. However, this does not rule out that house prices cannot fall in the near future.</p> / <p>Sammanfattning</p><p>Denna kandidatuppsats behandlar ämnet om en möjlig husprisbubbla i Sverige. Sedvanliga tekniker som används vid analysering av prisbubblor innefattar användandet av proportionen mellan huspriser och hyror samt disponibla inkomster. Även dynamiken i reella huspriser och demografiska förändringar utvärderas.</p><p>I denna analys jämförs åren mellan 1984 och 2004 genom att använda “imputed rent”, vilken representerar den årliga kostnaden av ägande. Även fundamentala faktorer som räntan, skuldsättningen samt omsättningen av hus undersöks. Den slutsats som uppsatsen resulterar i understryker att de sedvanliga bruken kan vara vilseledande och att ”imputed rent” är en bättre teknik. Detta eftersom ”imputed rent” representerar den verkliga kostnaden av ägande samt inbegriper viktiga avgörande faktorer, som räntan. Därför är svaret på titeln; nej, huspriserna (år 2004) i Sverige förefaller sig inte vara särskilt övervärderade, när de jämförs med årliga hyror av likvärdiga hyresrättslägenheter och disponibla inkomster, samt när hänsyn tas till den låga räntan. Detta utesluter dock inte en framtida nedgång av huspriserna.</p>