Researchers' View: Who Bears the Risk in Sweden’s Housing Market?

Has the Swedish Housing Market Become Less About Income and More About Family Wealth and Risk Capacity? — Paula Roth (SHoF/Sveriges Riksbank)

“The Swedish housing market is often discussed in terms of prices, mortgages, and affordability. My research points to another important dimension: housing wealth as a buffer against financial distress. Housing is a central part of household wealth in Sweden, but it is unevenly distributed. This means that homeownership can shape not only long-term wealth accumulation, but also households’ ability to absorb shocks and support the next generation.

In my work with Olle Hammar, Felicia Stokke, and Daniel Waldenström, we show that housing is one of the major pillars of Swedish household portfolios. But housing wealth is not evenly distributed. Tenant-owned apartments have become much more important: their share of total private wealth rose from 5.8% in 1999 to 15.8% in 2020, with most of the increase concentrated at the top of the wealth distribution.

Housing wealth also works as a buffer when households are hit by shocks. In my research with Kaveh Majlesi and Elin Molin, we study how severe health shocks affect households’ ability to meet their financial obligations. We find that the death of a spouse increases the surviving spouse’s likelihood of default by around 20%. But this increase is driven by renters. Homeowners are often able to repay claims, while renters lack housing wealth as a form of self-insurance.

Importantly, the mechanism is not simply income. Wealth plays a key role. Some households can absorb a shock by drawing on housing wealth, selling, downsizing, or otherwise using their balance sheet. Others face the same shock without that option.

These effects can also spill over to the next generation. When surviving parents face large income losses and lack housing wealth, their adult children are more likely to rely on social benefits and have debt in collection. Families therefore transmit not only wealth, but also financial resilience.”

Does Sweden’s Mortgage Market Strike the Right Balance Between Financial Stability and Access for First-Time Buyers? — Peter Englund (SHoF/SSE)

“The choice of housing tenure is a central decision in life. Owning your home gives long-run control but comes with considerable price risk, particularly for households with short horizons and little savings. This makes renting the natural choice for many young households and migrants. But the Swedish rental market is dysfunctional, with long queues for dwellings in attractive locations, whereas the market for owner-occupied homes—both apartments and houses—is quite efficient. As a result, new entrants are often forced into the owner market, even if they have little equity and are not yet well established in the labor market. These households take on considerable risk, and it is essential that the relevant financial markets work well and allow risks to be allocated efficiently.

Low property taxes and generous interest deductions contribute to high housing prices and demand for mortgage loans. Banks that issue mortgages take on very little risk. Credit evaluation is strict, and banks have full recourse to borrower assets in case of default. The price risk is carried by the borrower. Further, with flexible interest rates and severe prepayment penalties, interest risk is also largely carried by the borrower.

In general, too much risk is carried by households with small economic margins. There is a need for contracts and institutions that allow risks to be better shared between households, banks, and other financial institutions. This includes partial homeownership contracts, shared-equity mortgages, annuity loans, start-up loans combined with interest insurance, etc.”

Is Housing Increasingly the Mechanism Through Which Economic Inequality Is Created and Reinforced in Sweden? — Roine Vestman (SHoF/Stockholm University)

“In the last 25 years, Swedish housing prices increased by 257% in nominal terms and by more than 100% in real terms. Although there are country-specific factors that can explain part of the rise, it is primarily part of a global and broad trend in asset prices—prices of both houses and stocks have risen in almost all countries. An often-underappreciated explanation for this boom is the fall in the real rate. As the real rate falls (measured as, e.g., the 10-year real U.S. Treasury bond yield), the price of long-duration assets rises. The main beneficiaries of such a decline in the real rate will naturally be those who held high portfolio shares of long-duration assets already before the decline in the real rate.

How does this house price boom relate to wealth inequality? In the recent academic literature, the role of housing as a contributor to the rise in wealth inequality appears to be somewhat mixed, possibly due to the metrics researchers have focused on. Greenwald et al. (2025) show that movements in the real rate explain a high share of the variation in the U.S. top-10% wealth share. But they also find that in countries where housing is more prevalent in the middle class, the rise in the top-10% wealth share has been smaller. A study that is perhaps more relevant for our SNS report is Fagereng et al. (2025), who use Norwegian wealth data to document a strong intergenerational conflict due to the asset price boom. Furthermore, they argue that housing is the main driver of that conflict. In essence, older birth cohorts bought their houses cheaply a long time ago and now sell them expensively to younger cohorts. Our SNS report will attempt to address this kind of intergenerational conflict.”