The Swedish Housing Market, An Analysis of two Different Policy-Induced Shocks to the Swedish Fundamental House Prices

Abstract: This paper presents an analysis of two different policy-induced shocks to the Swedish housing market. An abolishment of the interest deduction and a reintroduced property tax. The paper closely follows the methodology presented by Bergman and Sørensen (2016). This is a model that can be used to analyze the behavior of the estimated fundamental house prices and is suitable for various policy simulations. The sample period is between the first quarter of 1986 to last quarter of 2018. The main finding of this paper shows that the estimated fundamental house prices have increased sharply since the mid-1990s. Furthermore, some evidence states that the abolishment of the interest deduction will have a more substantial effect than the reintroduced property tax on the forecasted fundamental house prices.