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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

#71

Post by soVeryTired »

tonyedgecombe wrote: post #18
estomagordo wrote: post #2

The combination of removing the wealth tax and the introduction of a 30% rebate on all interest costs for individuals have really combined to clusterfuck the Swedish housing market. Now, the interest rebate seems politically impossible to touch, even long term and through minor transitioning. Home ownership is so important to the economy and affects so many voters, that the property owning class always must be looked…

We got rid of mortgage interest relief in the UK so I wouldn't rule it out completely.

Doing so cratered the housing market in '89. Other countries watched and learned.

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

#72

Post by alkonaut »

charlesdm wrote: post #59
alkonaut wrote: post #56

Earlier quoted context omitted.

> Because prices are too high for average folks to purchase otherwise Yes. In a sell to the highest bidder, you aren't going to win with the amount you can borrow over 30 years, if the people bidding against you borrow on 50 or 100 years. Simple as that. So without any caps, people will request long mortgages simply to be able to win these auctions. Should be noted that this is now developing backwars again, and "pea…

Makes sense. So, if you don't mind me asking, how much are people paying for an average home? How much is an average salary?

Varies, of course. Average house is basically $100 to $350k but the average in Stockholm is probably around $1M depending on what areas you count. Not sure what the average salary is, but loan caps now are ~5 times the household (gross) salary. which sets the equation somewhat.

So a couple buying a stockholm home at $1M today (which isnt an uncommon price) would be borrowing say 75-80% of that, so making at least $1Mx0.8/5 as a couple or $1Mx0.8/5/2 each, or $80k/year. That's a good salary, but more commonly this couple would be selling something they made a nice profit on, and borrow less, lowering the income requirement.

This equation could be cut in 2 for a more average (4MSEK house, not 8MSEK) city or cut in 3 for more rural areas. Salaries fall off slower than house prices do, so rural areas spend less on housing than city dwellers.

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

#73

Post by dfhdfhfdh »

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.

Maybe housing shouldn't be a market system. Instead, housing should be free and landlords should be abolished.

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

#74

Post by dragonwriter »

opportune wrote: post #65
AznHisoka wrote: post #61

Earlier quoted context omitted.

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'…

> Salaries don't necessarily rise at the same rate as inflation. If they did, there would be 0% real growth in the economy.

You are confusing “salaries” with “output”; salaries (or even domestic incomes in total, which involves more than salaries) growing at the rate of inflation can occur with negative or positive real growth. Zero real growth means output growing at the rate of inflation. (National economies aren't closed systems, and some output may produce foreign rather than domestic income, as in returns to overseas investors.)

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

#75

Post by Supernaut »

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

No, it's nothing to do with Apple's tax arrangements. They're not in the business of buying houses. It's a simple supply and demand issue. There are a lot of young people who want to buy a home, and not enough housing stock to meet their requirements.

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

#76

Post by T-A »

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?

In short, no. It's not as if the EU lacks capital markets.

Also: "Is anyone really so naive to imagine that these balances are not already fully available to finance new investments by U.S. companies here? Do they think the global financial system is that unsophisticated? At present interest rate levels, a company needs only to issue debt at favorable rates in the U.S., invest the funds held abroad at floating rates, enter a fixed-floating interest rate swap, and voila, the company has access to the funds exactly as if they had been brought home. Indeed, this is just what many U.S. corporations appear to have done. So cry me some crocodile tears for companies that hold profits abroad." [1]

[1] https://www.hussmanfunds.com/wmc/wmc170821.htm

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

#77

Post by tmikaeld »

staticelf wrote: post #47
wjnc wrote: post #45

Earlier quoted context omitted.

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 p…

I'm kind of expecting to see a chain reaction happening next..

- Housing falls

- Investors sell

- Stock drops

- SEK value drops (We are here)

- Import prices goes up

- Goods prices goes up

- Less people are wiling to buy goods due to risk

- Wages go down

- People are let go

- Fewer people are willing to buy goods

- and so on..

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

#78

Post by GarvielLoken »

astura wrote: post #69
Supernaut wrote: post #36

Earlier quoted context omitted.

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.

You don't have to pay for health insurance in Sweden.

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

#79

Post by astura »

GarvielLoken wrote: post #78
astura wrote: post #69

Earlier quoted context omitted.

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.

You don't have to pay for health insurance in Sweden.

Of course, it was merely an example of an unhealthy obsession I've personally seen. There are many more. Another would be neglecting to save anything for retirement because you believe your home is your retirement fund.

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

#80

Post by charlesdm »

alkonaut wrote: post #72
charlesdm wrote: post #59

Earlier quoted context omitted.

Makes sense. So, if you don't mind me asking, how much are people paying for an average home? How much is an average salary?

Varies, of course. Average house is basically $100 to $350k but the average in Stockholm is probably around $1M depending on what areas you count. Not sure what the average salary is, but loan caps now are ~5 times the household (gross) salary. which sets the equation somewhat. So a couple buying a stockholm home at $1M today (which isnt an uncommon price) would be borrowing say 75-80% of that, so making at least $1M…

I'm assuming that $80k/year is gross? Given Sweden has high income taxes, borrowing say $800k on a $40k net salary (for a house!) seems like extremely bad financial management.

Which sane person who is good with money does that? That sets you up for a life of misery (and not unrealistically, an underwater house during your lifetime).

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