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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

#211

Post by wott »

dmode wrote: post #175
lisper wrote: post #127

Earlier quoted context omitted.

> #1 only consumes a percentage of profits, sit it can't make a sale unprofitable. Yes, that's true, but it makes a move less efficient. If we sell our house and buy another one of equal value, the higher the price, the more we lose in capital gain tax in the transition. If our house had not appreciated, we would pay zero cap gains. The higher prices go, the more expensive it becomes to move locally.

If your house didn't appreciate you would not have any profits either. Very confused on what the issue is. Let's say your house is 1mn and stays 1mn. You have zero gains and pay zero taxes. Net cash in your bank = ZERO Now your house becomes 2mn. So you have 1mn profit, first 500K is exempt. And you pay 25% on your next 500k. Net cash = 750K. Are you suggesting that you would rather have zero dollars in your bank acc…

He does not want to fill his bank account and be homeless. He wants a house. To be bought with the same money. That does not go into the bank account but into the new house.

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

#212

Post by lisper »

opportune wrote: post #192
lisper wrote: post #107

Earlier quoted context omitted.

> High housing prices are great for those who already owned houses Not really. Rising prices (not high prices) are great for people holding houses as investments . But for owner-occupied houses, rising prices are as bad for the owners as they are for everyone else. my wife and I own a house in Northern California, which we bought during the sub-prime crash. Since then it has nearly doubled in price. It is also too bi…

Capital gains is only applicable when you sell the house and it's not your primary residence, or if you made a ton of money on it. And it's only a tax on the appreciation of the house, not its market value. Real estate agent fees are only applicable on x% of the value of the house you sell. Higher property taxes do stink but are not applicable after you sell the house. I'm not sure why you can't afford to move. Have…

Suppose I bought my house for $1M and prices are stable. I can sell my $1M house and buy a different $1M house and the net cost to me is 6% agent fees.

But if prices have doubled now the net cost to me is much higher. The agent fees are double what they were, and I have to pay cap gains on $500k. All that is money I have to come up with somehow in order to complete the transaction. I either have to write a check, or take on more debt. The higher prices go, the more expensive a lateral move becomes.

Yes, I have more home equity if prices go up, but that only helps me if I cash out and move out of the area.

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

#213

Post by astura »

btilly wrote: post #181
astura wrote: post #132

Earlier quoted context omitted.

Well, if you didn't have prop-13 wouldn't your taxes just go up anyway even if you didn't sell? Around these parts all real property is reassessed every five years. So the tax burden would hit right away rather than when you sell which would be worse. I have a family friend whose neighborhood became really high end since the 30 years she bought the house. Her taxes are really high now and it's becoming a financial bu…

A hidden consequence of prop-13 is that every city wants commercial real-estate and none want residential because they get more taxes from businesses. This restricts the supply of housing, and is one of the root causes of high prices and long commutes. Without prop-13 we'd have more housing, more convenient housing options, and lower prices. Yes, long-term residents would have higher taxes. However most of us would s…

Thanks for the explanation.

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

#214

Post by yxhuvud »

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.

No, it should be slightly faster as outlying areas get more central (relatively speaking) as cities grow.

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

#215

Post by scarmig »

paulcole wrote: post #152
lisper wrote: post #107

Earlier quoted context omitted.

> High housing prices are great for those who already owned houses Not really. Rising prices (not high prices) are great for people holding houses as investments . But for owner-occupied houses, rising prices are as bad for the owners as they are for everyone else. my wife and I own a house in Northern California, which we bought during the sub-prime crash. Since then it has nearly doubled in price. It is also too bi…

I can only imagine the pain of owning a house that has increased over $500k in value in less than a decade. Are there support groups in your area you can turn to?

Oh, for Christ's sake. The OP isn't saying that he's being lynched or thrown into a gas chamber. Just that spiraling housing costs aren't an unalloyed good for home owners who want to stay in the area they live in.

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

#216

Post by zeeed »

styren wrote: post #205
bracobama wrote: post #88

As a foreigner here in Sweden I've heard about this mystical bubble which will burst sometime soon causing morgage rates to skyrocket. If I was going to buy something, say in North Stockholm, how long would you recommend waiting?

I recently sold my appartment in central Stockholm, I am reinvesting my money in stocks and renting for 1-2 years before hopefully entering a more healthy housing market. Of course it is all a gamble, but most people I talk to recommend waiting +1,5 years, if you can.

Couldn’t agree more. The current market situation here looks downright bizarre at times, I’m having trouble seeing how any substantial investment in this makes sense.

Who did you talk to for advice in Stockholm?

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

#217

Post by opportune »

ralusek wrote: post #207
opportune wrote: post #192

Earlier quoted context omitted.

Capital gains is only applicable when you sell the house and it's not your primary residence, or if you made a ton of money on it. And it's only a tax on the appreciation of the house, not its market value. Real estate agent fees are only applicable on x% of the value of the house you sell. Higher property taxes do stink but are not applicable after you sell the house. I'm not sure why you can't afford to move. Have…

You're right on 2/3 of those things. Capital gains is never a "cost" to them, they are by definition only going to be taxed on their gains. Real estate agent fees, like you said, are based off of the sell value, so unless their commission starts approaching 50% of the value of the house on a 2x gain...they make money. And if their mega-agent charges them 50% of the value of the house, then at least there are no longe…

You're right, I thought the parent was complaining about higher property taxes, not that property taxes would increase if they were to move to a similarly valued house.

That does disincentivize moving into an equally valued house, but moving into that house would have the parent paying about ~2% of X each year in property taxes as opposed to ~1% of X. The appreciation of the house still covers the increase in property taxes for the next 75 years.

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

#219

Post by eesmith »

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…

"which is my personal belief that is the leading cause to the biggest increases in prices"

The Sweden housing crises was decades in the making. https://www.thelocal.se/20170828/the-story-of-swedens-housin... .

Already the prices were high and housing scarce in 2010. https://www.thelocal.se/20100928/29292 , dateline 28 September 2010, quoting the local paper "Housing crisis worse than ever!"

http://www.bbc.com/capital/story/20160517-this-is-one-city-w... from 2016 points out "But amid strict building regulations and a lack of investment over a number of decades, successive governments have failed to build enough homes for its long-term residents, let alone the latest arrivals. ... Prices have also been pushed up since a law change in 2013, allowing private individuals to charge tenants based on their mortgage costs rather than comparable rent prices in the neighbourhood."

That 2013 change is just before your 2014-2016 time frame. Perhaps it had a bigger effect on the market than you think?

Yes, Sweden accepted a lot of refugees in the last few years. But as the first link points out, they cannot "afford the kind of houses that were being built in the years following the crunch." It seems more that they are priced out of the market more than causing the market prices to rise. (There are certainly secondary effects.)

I tried to find something in the Swedish press. I think this is relevant: http://www.gp.se/nyheter/g%C3%B6teborg/s%C3%A5-l%C3%A4nge-m%... from 2014, so before the timeframe you describe. If I read it correctly (thanks Google Translate), in Gothenburg there were 20,000 fewer homes, relative to the size of the population, than there was in the 1970s. There were 210,000 people registered in the housing queue, and the time an applicant needed to queue was 950 days.

One of the people being interviewed also argues that "there is big gap between what is being built and what those who need a home can afford to pay. A survey conducted recently by Sifo on behalf of the Tenant Association shows that 70 percent of them are considered to be able to pay a maximum of SEK 5,000 for a one. A newly built one in Kvillestaden costs over 6 500 kronor."

This seems to confirm the arguments presented in the English language press, that is, there are large-scale systemic factors that lead to the current housing crisis, and it cannot easily be explained by the large number of refugees.

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