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It's pretty crazy. I have owned a small apartment for 7 years. A neighbour just sold his apartment, which is the same size and standard as mine. Apparently, during this time the price has risen by 50 percent. I was worried about the price already 7 years ago, and felt pretty nervous buying this apartment. However, it seems that Keynes was right when he said that the market can stay irrational longer than you can stay solvent, except this time it is the other way around.

Oh, yes, there is this as well (Google translate)...

Sweden's homeowners are estimated to have increased their wealth by 972 billion because of that the construction was not as high as in Finland. Of this, 865 billion went to the richer half of the population and 350 billion to the richest decile.

Stockholm county homes are worth 375 billion more due to supply constraint. The municipality with the largest wealth effect per person is Danderyd 500 000.

The 972 billion figure is possibly the greatest wealth transfer in the history of Sweden. As a comparison, revenues from the (now abolished) the wealth tax 6 billion per years and the state budget includes 830 billion.


This transfer of wealth to from old to new homeowners is roughly 25-30 percent of GDP. That is a very large amount of capital, even if a lot of the old homeowners are unlikely to have cashed out, and have just had nominal profits.

I feel especially bad for young people who are buying right now, with a down-payment of 15 percent and the rest borrowed. As the Swedish rental market is stupidly regulated, renting is usually not an option. People who have coveted rental contracts are not keen to let go of them. Also, 30 percent of the money you pay in interest on mortgages is deducted from your income tax, so whatever rentals that emerge through loop-holes unto the private free-ish grey rental market are considerably dearer cashflow-wise than buying the equivalent apartment, especially when you take into account that a lot of people have interest-only mortgages.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Jun 24th, 2014 at 11:05:30 PM EST
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How very Irish. What could possibly go wrong?
by Colman (colman at eurotrib.com) on Wed Jun 25th, 2014 at 03:01:02 AM EST
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Don't you know that real estate prices can never go down, just because? :)

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jun 25th, 2014 at 04:05:21 AM EST
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Normally you would want to use monetary policy to optimize aggregate output, and use regulation to burst bubbles. But with deregulation-mania in full  swing, now the central bank is supposed to fix bubbles and to hell the the overall economy.
by rz on Tue Jul 1st, 2014 at 09:16:52 AM EST
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As if on cue...


A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jul 1st, 2014 at 09:21:35 AM EST
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The BIS thinks any problem can be solved with monetary tightening. We could replace the BIS with a parrot and no-one would notice the difference.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Jul 7th, 2014 at 02:19:59 PM EST
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