Driving factors behind housheold debt - An anaylsis for the Swedish counties

Abstract: This thesis investigates the driving forces behind the debt level in the Swedish counties, the possibility that the metropolitan areas are different from the rest of the country and presents a short discussion about possible policy actions to address this matter. The results show that housing price and supply, wealth, income and average age have a significant impact on the debt level where a difference between the three metropolitan areas and the remaining counties of Sweden are found. This divergence between counties is captured by interaction variables indicating that people with certain characteristics are more concentrated in the metropolitan areas. The most alarming result found is that higher condominium prices are leading to greater wealth, which has been driving up the debt in the metropolitan regions. This is indicating the use of equity withdrawal and unsustainable debt levels for condominiums. This could be addressed by policy actions targeted against the condominium market only, for instance by increased loan ceilings when allowing for equity withdrawal or amortization requirements.