The reaction of Swedish Real Estate Market to the last years events - Evidence from the past for the future?

The Swedish residential real estate market has undergone significant trans- formations over the years, with historical structural shifts driven by evolving regulations leading to market fluctuations. Analyzing these changes, we can categorize the market’s evolution into four distinct phases: pre-1993 marked by market liberalization, the 2008 global financial and economic crisis, and the 2016 increase in the main refinancing rate. Understanding these historical mile- stones is crucial for shaping our perspective on the current state of the market and forecasting its future trajectory.Key determinants influencing the Swedish real estate market are drawn from literature, encompassing factors such as banks’ refinancing rates, household in- come, welfare indicators, and price factors. These determinants have historically played crucial roles in shaping market trends and dynamics. The question arises: do these determinants persist over time, and can we derive predictive models based on this knowledge? Of particular interest is the proactive stance taken by the Swedish central bank, which raised the main refinancing rate earlier than its European and American counterparts. This divergence raises intrigu- ing questions about the unique characteristics of the Swedish market and how it responds to external economic factors.A hypothesis emerges: despite substantial changes, the identified determi- nants retain their long-term significance in influencing the Swedish real estate market. This hypothesis forms the basis for our exploration into the continu- ity of these determinants amidst evolving economic landscapes and regulatory frameworks. Understanding the historical context and determinants allows us to navigate the complexities of the market. It also provides a foundation for devel- oping robust forecasting models that can adapt to changing circumstances. As we delve into this exploration, we aim to unravel the enduring factors that shape the Swedish real estate landscape, contributing valuable insights to stakeholders navigating this dynamic and resilient market.Our research focuses on the Swedish residential housing market due to its distinct features, notably diverse transition processes. This market oers a com- pelling case study due to its unique blend of regulatory frameworks, monetary policies, and historical trends. By selecting this dataset, we aim to validate robust methodologies while gaining insights into a market that holds relevance on both national and international scales.Our data modeling approach involves a systematic application of Vector Auto-regressive (VAR) and Error Correction Model (ECM) frameworks, as out- lined in existing literature. Simultaneously, we constructed these models, align- ing with established methodologies, to gain insights into the complex relation- ships within the dataset. The VAR models capture dynamic interdependence’s among variables over time, providing a comprehensive understanding of the data’s behavior. In parallel, the ECM models address long-term equilibrium re- lationships and short-term dynamics, contributing to a nuanced understanding of underlying patterns.The integration of these models does not involve providing them with data in the traditional sense but rather focuses on their structural construction and alignment with recognized methodologies. This methodical approach allows us to uncover relationships, trends, and patterns within the dataset without ex- plicitly mentioning the providing process. By adopting this approach, we aim to derive robust insights and contribute to the advancement of knowledge within the domain, adhering to well-established methodologies in the literature.The results of our models underscore the enduring significance of determi- nants in the market. Through a comprehensive analysis of both the aggregate and individual phases within the models, we observed that the identified influ- encing factors continue to play a pivotal role in shaping market dynamics. These findings serve as the foundation for our aspiration to construct more precise and reliable forecast models.The holistic analysis enabled us to track the dynamics of determinants across various phases. Despite changes in the market over time, our models demon- strate that certain influencing factors remain consistently eective. This under- standing of long-term stability empowers us to develop informed forecast models based on reliable data and structured assumptions.Our primary focus now is to build precise forecast models based on the in- sights gained from our existing models. These models aim not only to consider current market conditions but also to integrate long-term stability and histori- cal development patterns. By employing rigorous methodologies and carefully incorporating the identified determinants, we aim to create models that are not only robust but also future-oriented. Our goal is to contribute valuable insights to strategic decision-making in an ever-evolving market environment through these forecast models.In an upcoming study, our aim is to develop a model for forecasting the development of net asset values of REIT’s and the market capitalization of shares of real estate companies in relation to the Swedish and later the European economic area. This requires modeling the performance of commercial and residential real estate and thus transferring the models to the commercial sector.