Regional House Price Differentials in Sweden : Factors that Influence the Choice of Location

Abstract: The purpose of the thesis was to study price differentials of housing in and outside of Swedish cities. When doing so, the average price of detached houses in every Swedish municipality and city was taken. The prices were based on the purchasing sum (köpeskillinen) while the investigated time period was 1995 and 2005. To separate between the different areas in Sweden, the country itself was divided into two separate regions; south, and north. South was used twice, once with the three major city areas (Stockholm, Göteborg and Malmö/Lund) included and once when they were not. Within each region two groups of locations could be differentiated; economic centres (Stockholm as an example) and sub-municipalities (Danderyd as an example). Economic centers represented “in cities” and sub-municipalities “outside of cities”. In addition to the main purpose, we also wanted to examine what variables that are affecting the price of housing. Therefore; according to our theoretical background, income, working opportunities and availability of teachers were the important factors. The empirical analysis signified that there is a clear average price differential between economic centers and sub-municipalities in all three regions. Detached houses in economic centers have become more expensive relative to sub-municipalities. The largest difference can be observed in the three major city areas, where the most extreme price changes have occurred. Consequently, it can be said that working opportunities had the foremost effect on house prices in the majority of our research areas. It was also found that income had a significant influence at several locations. Teachers per 100 students had on the other hand little or no effect at all on house prices. Moreover, where it was significant it affected houses prices negatively.