Tuesday, February 18, 2014

Apartment price indices for Sweden 1970 - 2013

Some people, especially Swedes heavy in debt in the largest Swedish cities, the banks, politicians, most economists and the real estate agents, claim that there is no housing bubble in Sweden because this time is different.

Below is apartment price indices for Sweden, spanning the period 1970 - 2013. Normally, when you see housing prices for Sweden you see prices for non-apartments, single standalone houses. The pricing bubble is even worse for apartments, which almost exclusivly are condominiums in Sweden, and not owners apartments, ie not real assets. A condominium is essentially only a club membership, and the club is frequently heavily in debt by itself. The club debts are not taken into account in the graphs below.

Recently the Swedish organisation for accountants tried to impose stricter rules for write-offs and depreciations for condominium clubs, as the clubs frequently never amortize and put away much too small funds for future necessary remodelling, renovations and standard maintenance. This was stopped short, as there was an outcry. The necessary higher condominium membership fees would crash the condo prices, but remember, there is no bubble in Sweden!

The lack of maintenance of Swedish condominium houses is a ticking bomb in itself, and on top of that you have the housing bubble as displayed below. Still, the international financial community is more than willing to finance this, as most of the financing is taking place outside of Sweden, and should be considered external debt. At present Swedish households alone have a debt of about 86% of Swedish GDP, almost all of it housing debt in various forms. The Swedish banking system is one of the largest in Europe, even the World, compared to GDP. Iceland, anyone?
Real apartment price index Sweden 1970 - 2013 (year 2000 = 100). "There is no housing bubble in Sweden!"
The inflation-adjusted prices were somewhat stable up until 1986. Since then real prices have increased by 754%. Compared to the average inflation-adjusted price 1970 - 1999, prices are up 521%. Yet, this is supposedly no bubble!

Nominal price index below.
Nominal apartment price index Sweden 1970 - 2013 (year 2000 = 100). "There is no housing bubble in Sweden!"
The indices above are for Sweden as a whole. The situation is much worse in particularly the capital, Stockholm, as well as in the second largest city1., Gothenburg.

1. By international standards, Gothenburg should more be considered a town, and calling Stockholm a city is stretching the imagination a little bit too far. On the other hand residents of Stockholm do have a very vivid imagination, considering that they generally deny the housing bubble.

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