Determinants of housing prices in urban and rural areas:

Abstract: The aim of this paper is to examine the determinants of housing prices in Sweden’s urban and rural areas. For this purpose we compare eight different regions which range from predominantly urban – the Stockholm region, to predominantly rural – the Upper North region, using an error correction model. We find that demographic change and income have the greatest impact in explaining regional house prices in the long run. The same result is found in the short run, even though the magnitude of the co-efficients is less than in the long run. Moreover, the prices of housing in the previous period contribute to explaining the short run prices in all regions. The negative values of the residuals imply that after being exposed to shocks the price of housing reverts to its long term equilibrium trend.