Global Interdependence Center Real Estate Market in Sweden Mats Wilhelmsson Center for Banking and Finance Royal Institute of Technology 1
Owner-occupied residential market 200 180 160 140 120 100 80 60 40 20 0
160 150 140 130 120
110 100 90 80 1975 1979 1983 1987 1991 1995 1999 2003 2007
200501 200603 200705 200807 200909 201011
2 Source: Statistic Sweden (SCB) and NasdaqOMX Valueguard-KTH House Price Index
Compared to‌ 450 400 350 300 250 200 150 100 50
0 1996
1998 Spain
2000
2002
Ireland
2004 Finland
2006
2008
2010
Sweden
3 Source: ECB and SCB
On the one hand ‌ on the other hand Household debt, per cent of disposable income 180 160 140 120 100 80 60 40 20 0
Household interest payments, per cent of disposable income 12 10
8 6 4 2 0
4 Source: SCB
Why did not prices decline in 2007/2008? • Interest rate • Employment/unemployment • Income • Income and property tax • Construction 5
Mortgage interest rate
%
Real disposable income
M.SEK
7
1,800,000
6
1,600,000
5
1,400,000 1,200,000
4
1,000,000
3
800,000
2
600,000
1
400,000
0
200,000 0 1993 1995 1997 1999 2001 2003 2005 2007 2009*
Unemployment
%
Income tax reduction
9
14%
8
12%
7 10%
6 5
8%
4
6%
3 4%
2
2%
1 0
6
0%
2005
2006
2007
2008
2009
2010
2001
2002
2003
2004
2005
2006
2007
2008
2009
Difference between population growth and new apartments.
New apartments (moving average) 20000
1.5%
15000
1.0%
10000 0.5% 5000 0.0% 0 -0.5% 1990
1600000 1400000 1200000 1000000 800000 600000 400000 200000 0
1994
1998
2002
2006
Building permits
Residential MA
Office MA
7
Sweden at risk? • The Riksbank’s inquiry (April, 2011) – “the high Swedish housing prices can largely be explained by what are usually called fundamental factors – that is to say that there are natural economic explanations for the price increases that have taken place”
• IMF (September, 2011) – – – – – –
No overvaluation A significant net wealth buffer Direct and life-long personal liability Developed social security system No buy-to-let market Low construction 8
Commercial Real Estate Market 12 10
8 6 4
2 0 1980
1986
1992
Cap rate-office
1998
2004
2010
Cap rate-residential
80000 60000
40000 20000
0 2000 Price-office
2004
2008 Price-residential
9 Source: Fastighetsv채rlden
At Risk? Financial solidity (2010) 60 50 40 30 20
10 0
10
Indirect investments in real estate 800 700 600
Index
500 400 300 200 100 0 40 30
Relative strength - OMX30
20 10 0 -10 -20 -30
11
News List of the best real estate climate in Europe 1. 2. 3. 4. 5.
Munich Istanbul London Paris Stockholm
• • • • •
Economic growth High sales volume Attractive yield gap Transparent market Rents on the residential rental market
• More expensive credit • Re-financing problems • A lot of newly developed retail 12
Source: Emerging Trends in Real Estate Europe – April, 2011
Thank you!
13