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Is the housing market in Sweden overrated?: A Study Of The Hypothetical Yield Of The Residential Real Estate In Stockholm
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2018 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

This paper presents a method to value the residential real estate portfolio of an economy by summarizing the future discounted values of the net operating income. The motivation for this choice of subject is the concern for a house bubble in Sweden due to the double-digit rise in housing prices which the economy has experienced during many consecutive years. However, the method is general and can be applied anywhere where relevant statistics is available. The challenge to use an income approach to residential real estate valuation lies in the fact that there is no obvious net operating income, as the owner and the end user is in many cases the same person. To solve this challenge, we determine the maximum possible net operating income by taking the households’ disposable incomes and subtracting their expenses. This will be a fictional value for the maximum possible net operating income or the imputed income for real estate owners. When this fictional net operating income is compared to the mean prices of properties, a maximum potential yield to capital invested in residential real estate is extracted. The current number for this maximal potential yield on the Stockholm market seem to be 6,4 percent, 2017. The main contribution of this paper to the science of economy is that it presents a way to use classical fundamental valuation methods to evaluate the price level of residential real estate, that, due to lack of tangible net operating income is not as straightforward as the valuation of the commercial real estate market.

Place, publisher, year, edition, pages
2018.
Keywords [en]
Real estate, valuation, housing market, bubble, speculation, rationality, user cost model, dividend discount model, Sweden, growth markets, super-star cities, residential, commercial, mark to value, fundamental valuation, yield, price appreciation, capital cost, return on investment, Stockholm.
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-355240OAI: oai:DiVA.org:uu-355240DiVA, id: diva2:1228063
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Available from: 2018-06-29 Created: 2018-06-27 Last updated: 2018-08-03Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
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  • nn-NO
  • nn-NB
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  • Other locale
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Output format
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