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

Some of my thoughts regarding the housing market, they come from both observing the market and from first hand experience by selling in Sept 2017.

- A widespread mindset of people living in Stockholm has been that the housing prices will continue upwards because they have been doing so for 15+ years. A change to this mindset was starting to be noticed in the spring of 2017 and recently rapidly changed. 66% believed in rising prices in September 2017 compared to 43% in October[1].

- The time it takes to sell an apartment in Stockholm is up from ~3-4 days to weeks.

- It was previously possible to earn $10k - $50k by flipping a newly produced apartment. This was done by commiting to buy the apartment when it is finished by paying a deposit and then sell it when you get the keys. This opportunity ceased to exist around the end of 2016.

- Trusted sources such as Svensk Mäklarstatistik[2] and Valueguard[3] indicate that the fall in prices is around 3% - 5% this far. Untrusted sources[4] indicate that the fall is above 10%. Trusted sources uses formulas to give better stability to their indexes, but they also react slower than the untrusted sources due to that. I suspect that untrusted sources also use data points that are removed even though they failed to close the deal.

- The difference between renting and cost of ownership is still huge, would estimate a 400% increase in interest rate would make the costs about even.

- About 56 250 (24.96% of total) people aged 20 - 27 in Stockholm are still living with their parents even though they would like to move to their own place. In the central parts of the city this share is above 60%. [5]

- Rising prices, difference between renting and cost of ownership and flipping of newly produced apartments has attracted a lot of people that invest/speculate in buying and renting out. They have probably not realized until now when the prices start to dip that they are sitting with a huge leverage on their investment/speculation and what risk that comes with. So they are probably the first ones to panic.

- Production of new apartments has exploded in Sweden the last 2 years, most of these are quite expensive which might have saturated the higher end of the market.

- The increase of prices has acted as jet fuel for different industries since a lot of people feel rich, increase their mortgage and consume the money. Companies that work with home makeover will be the first to get hit, but new car sales will also dip.

With this said I cannot be other than uncertain about the direction of the market, there are still a lot of things that indicate that the prices will increase (cost of ownership vs rent, demand for housing, interest rate prognosis). But if the market keep going down I am quite certain that it will drag a lot of other stuff with it and become a self fulfilling prophecy.

Edit: Sorry for a lot of typos and language that could be improved, just did a brain dump in a rush.

[1] http://www.privataaffarer.se/bostad/seb-hushallens-boprisfor...

[2] https://www.maklarstatistik.se/omrade/riket/stockholms-lan/s...

[3] http://www.valueguard.se/stockholmbr

[4] https://husmask.se/kommun/stockholm/

[5] https://www.svd.se/en-tredjedel-av-stockholms-unga-tvingas-b...

They buy more expensive homes than they need (or stay in the one that housed a family of four way after their kids have moved out) and pay off the mortgage. That's "saving" for retirement; they expect to get the money they've payed on their mortgage back when they sell it. Some practically only pay off the interest because we can do generous deductions off it and we have low demands of paying off the principal (or at least we used to have, now the Department of Finance is advising the government to require that banks make higher demands of paying back the principal) and why should I pay off the mortgage in full if the property prices always go up? At least that's the reasoning.

I have nothing against paying off your loan, but seeing it as your one and only retirement investment is something I have serious problems with. You should live where you are most comfortable living, I don't want people speculating in their homes on a casual basis "knowing" it always pays off. If you're going to really invest in your home, renovate a floor and rent it out. That way, you're contributing to the economy, you're not just speculating you're value investing and you know what the revenue stream of your investment really is. I had the privilege of growing up in a wealthy household with 7 bedrooms and after me and my brother moved out my parents decided three rooms was enough and converted the house into three apartments, living in one and renting out the other two.

Many of the neighboring families however don't like the idea since it means work, but they also don't want to move into something that won't grow as much over time. They're staying put even after the kids have moved out in hopes of cashing in right before retirement.

You'r missing 300k from your after tax sale proceeds. You could still afford the smaller house with 263k left over. You would make a 37k loss yes, but you could buy the new house. An important distinction in my opinion.

More importantly, a person who made money that will be subject to tax unless they find a person to explain to them how to avoid paying tax can DEFINITELY afford a tax person.

So, could you explain why the housing prices fell in the 90s when we took in more refugees than ever before? And why they rose considerably when immigration slowed down in the mid 2000s?

Because, for some reason you're convinced immigration is the main cause of rising housing prices and that the two clearly correlates, even though you can only back that up with stats that are about a decade old, any older than that and the correlation disappears. Maybe I'm missing something?