4 ms·

It's not just Sweden, it's almost everywhere (in the western world at least). It's almost entirely down to the effects of unprecedented quantitative easing ove

It's not just Sweden, it's almost everywhere (in the western world at least). It's almost entirely down to the effects of unprecedented quantitative easing over the past decade or so. When you print more money than you've ever printed before, it's only natural that the prices of things will rise as more people can afford to buy things. And even if more people can't afford to buy things, the money goes somewhere so it probably means the rich people get richer. And they'll go out and buy things they know poorer people will always need i.e. property. It all works well until property gets so expensive that the only people that can afford to buy it are other wealthy people. Eventually someone gets forced in to selling at a loss and the whole house of cards collapses as the wealthy who can afford to buy more property sit on the sidelines and wait / hope for a catastrophic collapse. Rinse, wash, repeat and yet we still question why the rich get richer... the only way to prevent property getting out of control is by regulating it so that it remains affordable and that speculators are discouraged from entering the market and encouraged to sell. But that won't happen either because most politicians own large amounts of property and they've a vested interest in seeing the price of property rise...

ThrustVectoring 9y ago
It's less about printing money and more about falling long-term interest rates (and thus, discount rates). Fundamentally, a house is worth the net present value of its use value. Lower discount rates means that more of that value gets pulled forward into its present valuation. An equivalent way of thinking of it is that house prices are fixed by mortgages to rents - when mortgage payments are lower than rents, people buy houses and rent them out, pushing house prices up. Falling mortgage interest rates push mortgage payments lower at the same principle amount, which convinces people to buy and push up housing prices.
- alkonaut 9y ago
  In Sweden though, pretty much no one rents a house. This may or may not be relevant to the above observation. It's also generally not allowed to buy flats to rent them out which limits speculation in that market.
  - ThrustVectoring 9y ago
    The analysis generally works for the value of owner-captured imputed rents, too. If shaving 10 minutes off your commute is worth $100/mo to you, that's going to cause homes closer to jobs to rise in price with interest-rate sensitivity.

ThrustVectoring 9y ago

It's less about printing money and more about falling long-term interest rates (and thus, discount rates). Fundamentally, a house is worth the net present value of its use value. Lower discount rates means that more of that value gets pulled forward into its present valuation. An equivalent way of thinking of it is that house prices are fixed by mortgages to rents - when mortgage payments are lower than rents, people buy houses and rent them out, pushing house prices up. Falling mortgage interest rates push mortgage payments lower at the same principle amount, which convinces people to buy and push up housing prices.

alkonaut 9y ago
In Sweden though, pretty much no one rents a house. This may or may not be relevant to the above observation. It's also generally not allowed to buy flats to rent them out which limits speculation in that market.
- ThrustVectoring 9y ago
  The analysis generally works for the value of owner-captured imputed rents, too. If shaving 10 minutes off your commute is worth $100/mo to you, that's going to cause homes closer to jobs to rise in price with interest-rate sensitivity.