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The Shock of Sweden's Housing Market Is Hitting the Country's Currency

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Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#41

Post by estomagordo »

staticelf wrote: post #24
alkonaut wrote: post #10

There are tons of things inflating house prices. The most important for Sweden are - Deduction of interest expenses from income tax. - Too long mortgages (100 years or more) means nominal prices are high which add to the risk - Historically big mortgages (90, 100 or even 110% of the cost could be financed - yes negativev down payments existed in the early 2000's). - Rent control of almost all flats, meaning no one wi…

Also to add to that, an extreme number of new people immigrating to Sweden, especially under 2014-2016 [1] (which is my personal belief that is the leading cause to the biggest increases in prices). Many municipalities also letting up to 25% of these new people jump ahead the queues leaving Swedes to be even more forced to buy an apartment instead of renting [2]. Also in Sweden for apartments, you don't own it. Most…

I don't even have enough karma to downvote you, but I'll make sure to come back to this thread when I'm above 500 :)

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#42

Post by walterstucco »

opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

We house owners pay a lot of taxes on houses in Italy so it's not exactly a paradise, the real problem is selling them.

Anyway I bought mine when I was 29 and rates were much higher

My friends at the time were richer than me, their families were richer than mine, they just loved spending money on cars and expensive goods in general instead of houses, that they possessed as a family

There's a difference, a big one, between an housing bubble and an honest investment

I knew the neighborhood in Rome where I bought the house would expand in the next 10 years, I wasn't trying to exploit newer generations (I'm 40 BTW) I was trying to secure my future

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#43

Post by charlesdm »

alkonaut wrote: post #10

There are tons of things inflating house prices. The most important for Sweden are - Deduction of interest expenses from income tax. - Too long mortgages (100 years or more) means nominal prices are high which add to the risk - Historically big mortgages (90, 100 or even 110% of the cost could be financed - yes negativev down payments existed in the early 2000's). - Rent control of almost all flats, meaning no one wi…

100 year mortgages? Why is this? Because prices are too high for average folks to purchase otherwise, or because people prefer "owning" (renting from a bank) instead of renting from a landlord?

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#44

Post by staticelf »

estomagordo wrote: post #41
staticelf wrote: post #24

Earlier quoted context omitted.

Also to add to that, an extreme number of new people immigrating to Sweden, especially under 2014-2016 [1] (which is my personal belief that is the leading cause to the biggest increases in prices). Many municipalities also letting up to 25% of these new people jump ahead the queues leaving Swedes to be even more forced to buy an apartment instead of renting [2]. Also in Sweden for apartments, you don't own it. Most…

I don't even have enough karma to downvote you, but I'll make sure to come back to this thread when I'm above 500 :)

By that time your apartment at/in Södermalm will probably be worth half of what you bought for ;)

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#45

Post by wjnc »

staticelf wrote: post #24
alkonaut wrote: post #10

There are tons of things inflating house prices. The most important for Sweden are - Deduction of interest expenses from income tax. - Too long mortgages (100 years or more) means nominal prices are high which add to the risk - Historically big mortgages (90, 100 or even 110% of the cost could be financed - yes negativev down payments existed in the early 2000's). - Rent control of almost all flats, meaning no one wi…

Also to add to that, an extreme number of new people immigrating to Sweden, especially under 2014-2016 [1] (which is my personal belief that is the leading cause to the biggest increases in prices). Many municipalities also letting up to 25% of these new people jump ahead the queues leaving Swedes to be even more forced to buy an apartment instead of renting [2]. Also in Sweden for apartments, you don't own it. Most…

I upvoted. I guess it's the first few words that suggest a racist / popularist post, but it's ontopic IMHO.

You point to an influx of people in the age range that usually rents an apartment. Such local equilibria are quite instable. It only takes a few hundred excess renters to destabilize a local (regulated) market for housing. That leads to crowding out where those that usually would rent, but can afford to buy will buy. A few more buyers will lead to the a dysequilibrium in the next market.

One thing - you expect upward pressure on prices, with more people competing for the same number of houses. The OP is about falling prices.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#46

Post by jankotek »

expertentipp wrote: post #30
maxxxxx wrote: post #25

Earlier quoted context omitted.

Totally agree. It seems one of the factors that helped the US until the 90s was that housing was affordable so people could move around easily. A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead.

> A "strong" housing market seems to indicate that there are no productive places for investing and no wage growth so people need to gamble on houses to rise instead. You've just summarized the situation in Prague, Czech Republic.

Prague has problem with supply, new flats are build slowly.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#47

Post by staticelf »

wjnc wrote: post #45
staticelf wrote: post #24

Earlier quoted context omitted.

Also to add to that, an extreme number of new people immigrating to Sweden, especially under 2014-2016 [1] (which is my personal belief that is the leading cause to the biggest increases in prices). Many municipalities also letting up to 25% of these new people jump ahead the queues leaving Swedes to be even more forced to buy an apartment instead of renting [2]. Also in Sweden for apartments, you don't own it. Most…

I upvoted. I guess it's the first few words that suggest a racist / popularist post, but it's ontopic IMHO. You point to an influx of people in the age range that usually rents an apartment. Such local equilibria are quite instable. It only takes a few hundred excess renters to destabilize a local (regulated) market for housing. That leads to crowding out where those that usually would rent, but can afford to buy wil…

Well, if you are increasing the population a lot, all of those people are going to need somewhere to live. It isn't really hard to figure that out but most people don't seem to make that connection.

Don't understand how it could even be remotely racist or popular. The statistics of housing prices correlates very well with increases in immigration. Of course, correlation does not imply causation but in this case I'm personally pretty convinced it is the main causation of the extreme increases.

Regarding the falling prices, yes, I believe they were about to fall even before the massive influx of new people (because of all the other things mentioned) but were artificially held up a couple of extra years due to new people.

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#48

Post by IdontRememberIt »

opportune wrote: post #14

When will we learn that a "strong" housing market is not necessarily a good thing? High housing prices are great for those who already owned houses but terrible for everyone else (e.g. the entire generations born after prices became inflated). Not to mention people are greedy and will over leverage themselves when interest rates are good. No country should let the "landed gentry" hold them hostage over interest rates…

The older generation could buy at a very low price and refinance during a very long almost nul interest rate era. Guess which generation owns the political and financial power... I am scared that in some high public debt countries they will confiscate value through (increased) inheritance tax... But I am even more scared by the ECB normalizing the interest rates...

Re: The Shock of Sweden's Housing Market Is Hitting the Country's Currency

#49

Post by charlesdm »

mhandley wrote: post #22
selectodude wrote: post #12

Earlier quoted context omitted.

> Too long mortgages (100 years or more) means nominal prices are high which add to the risk That is absolutely bananas. Almost like a Chinese-style 99 year lease. Your kids might be dead by the time it's paid off, you'll never own it. Edit: apparently the AVERAGE mortgage term is 140 years! Just recently the Swedish government limited the maximum mortgage term to 105 years. That is some absolutely stupid policy.

In the UK, around a fifth of mortgages are interest-only, which I guess is effectively an infinite-term mortgage. In comparison, at least you're paying some part of the capital back on a 100 year mortgage. Of course, both are storing up trouble for the future. https://www.ft.com/content/4e0377e6-6ad4-11e7-bfeb-33fe0c5b7...

If you're getting an interest only mortgage, at least you know what you're getting into. They're great for investment properties and other investments, not so much for your main residence.

Then again, there is the problem of refinancing when the end date comes due, which is probably why you have 100+ years mortgages in Sweden.

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