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Billions more needed to rid housing shortage

Vivian Tse · 27 Oct 2010, 09:48

Published: 27 Oct 2010 09:48 GMT+02:00

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Although 35,000 new homes are needed every year to address the shortage, but only 28,000 are being built, according to the National Housing Credit Guarantee Board's (Statens Bostadskreditnämnd, BKN) report "What would it cost to build out the housing shortage?" published on Wednesday.

The board is a national government agency under the Ministry of Finance. It publishes a market report three times a year in February, May and October.

The board's estimate is based on a return to normal interest rate and 20 percent lower housing prices. Currently, about 115 billion kronor are invested in per year in homes.

Soaring production costs are the biggest threat to building, the agency said. In the report, the agency singled out the development of future interest rates and housing prices as having more of an impact on the housing market than demographics.

"Our calculations show that the last decade's sharp increase in prices for houses and condominiums has very little to do with population growth and an inadequate shortage of construction. The calculations show that the driving forces behind the price increase is primarily lower interest rates and increased household incomes," the report explained.

Together, these factors explain about 70 percent of the rise in

housing prices over the last decade. The remaining 30 percent is due to changing household expectations on future price developments and reduced property taxation.

The last decade's construction has been strong enough to counteract the effect on prices on population growth. According to the report, Sweden's population grew 80,000 in 2009 and the increase is expected to be large again this year.

At the same time, housing prices have risen sharply and despite a favourable investment climate compared with the 1990s, investments in housing in Sweden remain lower than in other countries and in Sweden during the 1960s, 1970s and 1980s.

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The number of completed apartments is about half of that before the crisis in the 1990s, but the majority of building is taking place in large metropolitan areas. Half of all the apartments built in Sweden are multi-unit residential blocks in Stockholm.

The high housing prices means that those who want to buy a home must finance such a purchase with loans to a greater extent than before. As a result, those who have a fixed income and already have a home to mortgage have an advantage over others looking for housing.

"A housing shortage in the narrow economic sense does not exist, just as there is no shortage of other goods and services in a market where price determines supply and demand," the report said.

Vivian Tse (vivian.tse@thelocal.se)

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Your comments about this article

10:55 October 27, 2010 by EtoileBrilliant
There's an elephant in the room and as usual the Swedes don't want to talk about it. Its called rental housing market reform. Until landlords are able to command market rates for their properties there is no incentive to build.

The Economist published their annual property survey last week:


It showed Swedish house prices are 41.5% overvalued. Their metric is based on the discrepancy between rental yields and property prices.The answer is to deregulate the rental market and let rents go up. This will slow the growth (or even reverse it) in Swedish property prices.
11:08 October 27, 2010 by eppie
@ EtoileBrilliant

But if the rental market is deregulated rental prices will increase (a lot) making it again more interesting to buy?

Further the house price is probably overvalued largely because of the possibility to get back part of the interest paid on your mortgage.
11:22 October 27, 2010 by Frabelais

Typical of deregulation proponents, you use your statistical evidence selectively. The same great gap in 'overvaluation' is evident in places as diverse as Australia (63%), Hong Kong (58%), and France (42%).

Why don't you come clean, EB? No matter what the situation, you want the market deregulated.
12:36 October 27, 2010 by EtoileBrilliant
@eppie - Sorry if I wasn't clear. If you can charge market based yields for new properties, people will build new rental apartments and thus take the pressure off the owner-occupied market.

@frabelais - you're pretty cocky for somebody so ignorant. Let me come clean. I am long two properties in the Stockholm area. If the market was deregulated and house prices came down, I would be the last person to laugh. However, I'd like to think that I form a point of view no matter how contrary it is to my own circumstances. If you don't believe me, ask the OECD. They've been recommending the same course of action for years now:


Now I've explained my position, perhaps you can explain which part of my earlier posts led you to believe "No matter what the situation, you want the market deregulated" or are you just mouthing off?
14:50 October 27, 2010 by Hustla
Supply and demand is a simple concept, but there will be no supply if you cannot cash in on the demand.. Simple.Economics. not just for the housing market.
15:28 October 27, 2010 by Sam1
The north of Sweden is hardly populated ....civilize the place up there ..specialy the hospitals and vårdcentrals then have more life in the markets..More opportunities more indoor activities...Then there would be a less crowd in the south...Since people run away from the situation in the north...in the south everything runs better hospitals, work, life, technology, nightlife, more friends, more culture..
16:48 October 27, 2010 by mojofat
@Sam1 Wouldn't that cost even more? Not only would you have the same costs associated with new buildings but you would also have to build the extra infrastructure that's already in place in the southern areas. Plus, as you point out, nobody wants to live there.

The deregulators are correct. I can't imagine a worse business to be in than apartment building owner in Sweden. Your told who will rent from you, your told what you can charge, and no doubt there are all sorts of fees/taxes/maintenance one must pay for. Finding an apartment to live in is a miserable process here. Aside from the obvious scams seeking upfront deposits before they'll show you the place, I've been hit up for "cash-in-hand" deals where they want me to pay them for the privilege of selecting me to sublet their place for 6 months.

Here's an original thought: how about just letting landlords advertise their rentals as they see fit and allow me to contact them as I see fit, instead of forcing everyone to use that worthless Boplats.se website. I applied for student housing back in May and I recently contacted them to find out if I could get a place. They didn't quite laugh in my face, but they told me it would be approximately 3 years! And I'm in a 2 year program!! Government controlled housing has never worked anywhere.
17:47 October 27, 2010 by janswed
Sam 1 Having been born and raised in the 'uncivilised' north of Sweden.who are you to comment on the north , I am sure compared to the Islamic hellhole from where you originate it is paradise for now, untill you and youre ilk decide to move there and ruine the place.
21:31 October 27, 2010 by jazzIIIlove
guys, in fact, Sam1 has a good point. Wouldn't it be nice to move the population to north? I mean what if there are more opportunities in north, then southerns will definitely move for new opportunities.

But Sam1, bro, here is pretty cold. I am not sure even there will be good stuff here, people may not want to come, this is psychological acceptability.
00:17 October 28, 2010 by Swedesmith
We have a saying up here in the north country, "-40 tends to keep the riff-raff out".

We have another saying, too. "I'm from the government and I'm here to help you." Sarcasm intenden.
05:36 October 28, 2010 by anticommie
Socialism Fail
08:58 October 28, 2010 by engagebrain
The problem is Stockholm is the black rental market, which pushes up rents but the rip off rent does not go the landlord.

It could be easily eliminated by simply checking on who actually lives in each flat.

Why is this massive and illegal activity allowed to persist ?
22:28 October 28, 2010 by ATinNM
Housing Market Reform!

Because it's worked so well in Iceland.

And the US.

And Ireland.
20:48 October 31, 2010 by Tdye
@ aTinNM

good point
14:45 November 14, 2010 by comrade Kev
Yes @aTinNM thats the way forward as here in Ireland bloated unaffordable housing that you neeed to borrow zillions for then step two no paying jobs, for the Ideal economy you need unemployment at 15% with property going up by 15% per annum ah yes what a perfect mix that will be.
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