Swedish Regional Housing Prices and Their Variation : The Role of Labor Market Characteristics

Housing prices in Sweden have increased substantially during the past two decades. Therefore, making it less affordable for home ownership. Furthermore, housing prices vary considerably across Swedish counties, resulting in substantial differences in affordability. The existing literature displays little to no evidence on these issues at regional level. The limited evidence is a consequence of the primary focus being on national and urban housing prices. Therefore, this thesis aims to investigate short-run determinants of regional housing prices. Additionally, it explores whether local labor markets characteristics contribute to the regional variation in prices. The thesis samples five out of the 21 Swedish counties. The observed data covers the time period of 2005 to 2023 on a quarterly basis. The empirical analysis applies a time series approach using a Vector-Autoregressive model (VAR) to analyze short-term dynamics of regional housing prices. The findings suggest that real disposable income is a positive driver of housing prices across the counties. Over longer time periods disposable income contributes to variation in regional housing prices. The three labor market characteristics of analysis, such as unemployment, suggest an importance for housing prices in two out of five counties. This relevance reflects local importance. The outcome of the labor characteristic appeared in the urban counties. Moreover, the findings suggest a clear grouping in model fit between urban and non-urban counties.