Epsilon Archive for Student Projects

Abstract

This thesis examines how new residential construction affects housing prices in Sweden, distinguishing between owner-occupied and rental housing. Using panel data from 21 counties (2005–2023) and fixed effects regression models, the study finds that increased construction of owner-occupied units is associated with higher prices, likely reflecting that new supply is added where demand is already strong. Conversely, more new rental housing correlates with lower prices, suggesting a substitution effect between tenure types. The results are robust when controlling for population, income, education, and unemployment. However, the study also highlights that the relationship between supply and price is complex and context-dependent, influenced by local policies, demand factors, and market segmentation. Limitations include the use of aggregated data and challenges in establishing causality. The findings suggest that supply-side policies alone may not be sufficient for improving affordability; a balanced approach that includes measures to stimulate rental housing and considers local market dynamics is needed.