Is there an evident housing bubble in Sweden ?

A discussion has been ongoing for some time on house prices and household indebtedness in Sweden, and whether their current levels are sustainable in the long term. In this article we study this issue for single-family house prices, both in Sweden as a whole and in various municipalities. Our results do not support the notion that Swedish houses are evidently overvalued in the country as a whole, if we assume that their prices are influenced by the relevant economic variables in the same way as in a number of other countries. When we change our perspective and look at how house prices on the municipal level have developed relative to earned income in the same municipalities, we cannot find any strong evidence for abnormal price differences among municipalities. However, the current high valuations of housing is only sustainable in the long term if households’ housing costs remain low in relation to their income. Concern over the current developments on the Swedish housing market is therefore justified.