Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 1997:4: The Determinants of Urban House Price Fluctuations in Sweden 1967-94

Katinka Hort
Additional contact information
Katinka Hort: Ministry of Finance, Postal: SE-103 33 Stockholm, Sweden

Abstract: This paper asks if the dramatic fluctuations in Swedish single family house prices experienced over the last decade have only been driven by fundamental demand and supply factors or if they result also from speculative behaviour in the housing market. A restricted error-correction model of real house prices is estimated on a Swedish panel data set using a fully modified estimator of the cointegrating relation. The results suggest that the boom and bust experienced around 1990 was primarily driven by fundamentals. The short term equation explains about 70 percent of the total variation in real house price changes. The estimate of the error-correction parameter suggests that adjustment following a shock to the market is quite rapid as compared with other countries such as the U.S, the U.K and Norway.

Keywords: house prices; adjustment dynamics; fundamentals; speculative behaviour

JEL-codes: C33; R31

52 pages, January 15, 1997

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Published as
Katinka Hort, (1998), 'The Determinants of Urban House Price Fluctuations in Sweden 1967-94', Journal of Housing Economics, vol 7, no 2, pages 93-120

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