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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

#61

Post by AznHisoka »

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…

Shouldn't home prices rise the same rate as inflation?

The % of salary people devote to housing shouldn't increase by a large amount each year.

And people's salaries don't rise that much year to year either. It rises the same rate as inflation.

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

#62

Post by frgtpsswrdlame »

baursak wrote: post #17

I don't get it. When prices are high, it's a housing crisis. When prices are going down, it's a housing crisis. It's almost as if news articles just need to be written regardless of the reason.

It's because of how much money and emotion the average person is throwing into a house.

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

#63

Post by EGreg »

Contrarian position: low inflation seems like a good problem to have. You can always increase inflation much more easily than decrease it -- such as printing more money and giving it to people or businesses to spend on things, which spurs the economy.

What is interesting to me is that, even though it seems to take less Kronor now to buy something, somehow it slumped against the Euro so it takes even less Euro to buy that same thing? Yet the thing remained the same?

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

#64

Post by saiya-jin »

jacknews wrote: post #16

While a drop in house prices might, in theory, negatively effect the economy in the short term as homeowners, in theory, have less disposable income, in the long term land prices/speculation (and when people talk about house prices, they really mean land prices) are a huge rentier suck on the economy, and should be taxed to the point that speculation or 'investment' in land itself (not the development of it) reaps ze…

> After all, why should anyone profit merely by owning land, when the value of that land really reflects other people's economic activity and development in the surrounding area.

After all, why should anybody profit from merely owning a stock? Or vintage car/painting, whatever that can appreciate over time because of supply/demand. This is how people invest. I understand that being on the other side of equation might suck, but that't not the problem of equation.

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

#65

Post by opportune »

AznHisoka wrote: post #61
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…

Shouldn't home prices rise the same rate as inflation? The % of salary people devote to housing shouldn't increase by a large amount each year. And people's salaries don't rise that much year to year either. It rises the same rate as inflation.

In this case home prices rose because it became cheaper to make mortgage payments on a house. People were willing to spend the same mortgage payment as before, so the net effect is that housing prices rose.

Salaries don't necessarily rise at the same rate as inflation. If they did, there would be 0% real growth in the economy. Inflation is usually measured by watching the prices of a basket of goods: if those goods' prices increased by 5%, then inflation is 5% (in reality it can be more complex than this).

Inflation isn't a "real" metric in the sense that it affects all things equally. Housing prices could increase by 50% but the price of a gallon of oil or a bar of soap could decrease by 10%.

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

#67

Post by mixmastamyk »

AznHisoka wrote: post #61
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…

Shouldn't home prices rise the same rate as inflation? The % of salary people devote to housing shouldn't increase by a large amount each year. And people's salaries don't rise that much year to year either. It rises the same rate as inflation.

Bank loans, money creation, and tax breaks subsize them, causing prices to rise. Not to mention population growth and nimbys restricting supply.

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

#68

Post by lg »

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…

> Also in Sweden for apartments, you don't own it. Most apartments for sale is so called "Bostadsrätter" which means you own a percentage of the association that owns the apartment building(s). If the association/organization has a bad economy and can't pay the debt they could be forced to sell the entire apartment building(s) and you'd loose your apartment while still having a loan to the bank.

In the US we call these co-ops and they are mostly an NYC phenomenon. Fun fact, some co-ops don't own the land they sit on, they rent it. And those rents get renegotiated every 30 years, potentially making a bunch of co-op owners suddenly unable to afford their monthly maintenance payments.

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

#69

Post by astura »

Supernaut wrote: post #36
ptha wrote: post #29

Earlier quoted context omitted.

In Ireland we had a property bubble during the "Celtic Tiger" years, and suffered a major correction after 2007 [1]. Apartments in Dublin the capital city lost about 62% of their value. 10years later and prices are climbing steadily upwards [2]. It's deja vu all over again. In Ireland we have a national obsession with owning property. [1] https://en.wikipedia.org/wiki/Irish_property_bubble [2] https://tradingeconomic…

Your use of the term "obsession" implies a degree of irrationality. Many people, myself included, would contend that the desire to own your own home is eminently sensible.

Jeez, nobody said the desire to own your home was irrational, by definition. You can have a rational desire to own a home or you can have an irrational obsession.

Irrational obsession would include things like when you prioritize homeownership over financial security and other basic necessities like healthcare or food. For example I know someone who gave up health insurance to buy house - and she readily admits this.

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

#70

Post by lin_lin »

opportune wrote: post #58
lin_lin wrote: post #39

Earlier quoted context omitted.

> It's deja vu all over again. Except for the lack of readily available credit. For the most part, it seems the people paying the high prices are "able" to afford it. The problem is that home ownership (and the security that brings, particularly in Ireland) is not attainable for most young people and families anymore.

Could this be a result of Ireland being somewhat of a tax haven? If there's a lot of capital just sitting in Ireland waiting to be repatriated, it might make sense to invest that money within Ireland in the interim. That would increase demand for housing in the short term. The main thing to worry about would be that your housing market could experience a crash whenever that money does get repatriated

> Could this be a result of Ireland being somewhat of a tax haven?

Not really. The problem is that building all but stopped in the aftermath of the 2007/8 crash. Meanwhile the economy recovered, Dublin in particular is booming now but we're still lacking enough homes to meet demand and building never recovered to the necessary levels. Add in a reluctance for "building up" and a growing population, that gets you higher and higher prices...

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