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Spatial and temporal diffusion of house prices in Sweden

Öljemark, Jacob LU and Egnell, Emma LU (2019) NEKN01 20191
Department of Economics
Abstract
In Sweden, both house prices and household debt have more than doubled over the
last two decades. This rapid surge has generated concerns about a housing bubble
and the economic consequences that may follow, resulting in a considerable body
of research analysing the fundamentals of Swedish house prices. To assess how a
bubble or a crisis would ripple over the housing market, it is key to also understand
the dynamics of house prices.
This paper examines the spatial and temporal diffusion of house prices in Sweden.
The first aim is to empirically determine if regional house prices respond to a change
in Stockholm house prices. The second aim is to establish which measure of proximity that gives the most accurate representation for... (More)
In Sweden, both house prices and household debt have more than doubled over the
last two decades. This rapid surge has generated concerns about a housing bubble
and the economic consequences that may follow, resulting in a considerable body
of research analysing the fundamentals of Swedish house prices. To assess how a
bubble or a crisis would ripple over the housing market, it is key to also understand
the dynamics of house prices.
This paper examines the spatial and temporal diffusion of house prices in Sweden.
The first aim is to empirically determine if regional house prices respond to a change
in Stockholm house prices. The second aim is to establish which measure of proximity that gives the most accurate representation for the cross sectional dependence
between regions. The purpose is to assess how a change in Stockholm house prices
could ripple over Sweden in the event of a bubble or a crisis.
The analysis is performed by estimating two price diffusion models with OLS,
using monthly regional real house price data over the period 2005m1 to 2018m12.
The results suggest that Stockholm affects house prices in more than half of the other
regions contemporaneously, and that regions that are economically or geographically
close to Stockholm are more affected than regions far away. Further, the results
suggest that economic proximity is better than geographical closeness at explaining
the cross sectional dependence between regions, resulting in a more reliable analysis
of the spatial and temporal diffusion of house prices. Together these results provide
important insights for how a change in Stockholm house prices could ripple over
Sweden in the event of a bubble or a crisis. (Less)
Please use this url to cite or link to this publication:
author
Öljemark, Jacob LU and Egnell, Emma LU
supervisor
organization
course
NEKN01 20191
year
type
H1 - Master's Degree (One Year)
subject
keywords
house prices, ripple effect, spatial and temporal diffusion, proximity
language
English
id
8980434
date added to LUP
2019-08-08 10:30:57
date last changed
2019-08-08 10:30:57
@misc{8980434,
  abstract     = {In Sweden, both house prices and household debt have more than doubled over the
last two decades. This rapid surge has generated concerns about a housing bubble
and the economic consequences that may follow, resulting in a considerable body
of research analysing the fundamentals of Swedish house prices. To assess how a
bubble or a crisis would ripple over the housing market, it is key to also understand
the dynamics of house prices.
This paper examines the spatial and temporal diffusion of house prices in Sweden.
The first aim is to empirically determine if regional house prices respond to a change
in Stockholm house prices. The second aim is to establish which measure of proximity that gives the most accurate representation for the cross sectional dependence
between regions. The purpose is to assess how a change in Stockholm house prices
could ripple over Sweden in the event of a bubble or a crisis.
The analysis is performed by estimating two price diffusion models with OLS,
using monthly regional real house price data over the period 2005m1 to 2018m12.
The results suggest that Stockholm affects house prices in more than half of the other
regions contemporaneously, and that regions that are economically or geographically
close to Stockholm are more affected than regions far away. Further, the results
suggest that economic proximity is better than geographical closeness at explaining
the cross sectional dependence between regions, resulting in a more reliable analysis
of the spatial and temporal diffusion of house prices. Together these results provide
important insights for how a change in Stockholm house prices could ripple over
Sweden in the event of a bubble or a crisis.},
  author       = {Öljemark, Jacob and Egnell, Emma},
  keyword      = {house prices,ripple effect,spatial and temporal diffusion,proximity},
  language     = {eng},
  note         = {Student Paper},
  title        = {Spatial and temporal diffusion of house prices in Sweden},
  year         = {2019},
}