Macroeconomic Determinants of Small-House Prices in Gothenburg: An ARDL-ECM Time-Series Analysis

This study applies the ARDL-ECM method to examine how macroeconomic factors affect small-house prices in Gothenburg. It focuses on three months maturity mortgage rates, disposable income, inflation and unemployment, using a demand-and-supply framework that accentuates affordability, purchasing power, credit costs and labour-market conditions. The analysis includes descriptive statistics, correlation analysis, unit root test, ARDL estimation, Bounds cointegration test, long run estimation and error correction modelling and diagnostic test. The unit root results show that the variables are integrated at both orders I(0) and I(1), confirming the suitability of the ARDL approach. The result shows that short-run dynamics of small-house prices in Gothenburg are driven primarily by mortgage rates and household income. An increase in mortgage rates exerts a negative effect on prices, while inflation and unemployment show no substantial contemporaneous effect. The ECM shows a negative and significant adjustment coefficient, suggesting that shocks are corrected over time, although slowly. Overall, rising small-house prices are primarily explained by income growth and mortgage rates, with lower direct effects from inflation and unemployment. These findings suggest that housing affordability policies should address both household's purchasing power and credit-market conditions, alongside broader constraints on housing supply.