The effect of mortgage interest relief on housing prices

Abstract: This thesis aims to analyse whether, and by how much, mortgage interest relief is capitalized in higher housing prices. Using fixed-effects regression with cost of housing on house prices during a 20-year period in Sweden, we estimate the housing price sensitivity to cost increases. We find a statically significant negative coefficient estimate of -3.502, indicating that removal the Swedish mortgage interest relief might induce a housing price fall of 3,55% in average.