Same, same but differentby Bjørn-Erik Øye Prognosesenteret, Norway
About house prices in general and a more detailed look at Oslo and Stockholm
The science of understanding and detecting correlations among the European Housing markets can be compared with the complexity of Einstein`s theory of relativity. The moment you think you have found some reasonable answers you will for certain find new illogicalities and accidental correlations.
There obviously should be (and is) a strong connection with the overall business cycles and the investments in the housing sector - especially regarding the production of new dwellings. These correlations are more and more visible in-line with the deregulation of markets throughout the European continent and especially in the Nordic countries. When it comes to the development of house prices from country to country it seems to be as mentioned - just accidental connections.
In the case of the Nordic countries we find parallel trends in Denmark and Finland both with a 35% growth in the house prices from 2005 to 2017 (February). We have not succeeded in finding common explanations for this development. Same, same but different. When it comes to Norway and Sweden we find the same parallel, but on a higher level. In total the Norwegian house prices in February 2017 is 2.4 times higher than in 2005 (Feb) the equivalent figure for Sweden is 2.6. This parallel exists despite of the very different trends in the overall business cycles in Norway and Sweden.
Further on it is a fact that the structure in the housing markets of these two countries are very different. In Norway the deregulation of the market started early in the 80s and todays market has no safe haven and with an ownership rate of 80%. The Swedish market still have safe havens i.o.w. parts of the markets are still regulated (rental levels and corrections) and the total ownership rate is close to 60%.
The Norwegian and Swedish economy has followed different curves over the past 10 years. Sweden with its EU membership (though not EURO) and a strong, traditional export orientated industry is closely correlated to the overall business cycles in Europe. On the other hand, Norway, which is very much outside the EU-system (though more inside than the Norwegians themselves believe), in possession of its own currency, an independent interest rate policy (again not so independent as the Norwegians believe) and an economy (in this period) heavy effected by the oil/gas sector.
The housing markets of Europe are local. This also counts for different parts of single countries. We see a wide spread in the house prices in different parts of each country.
This is obviously also the case in the following example: Oslo and Stockholm (see Figure 1).