Followed comes a summary of reports and forecasts on recent and future shifts in land prices in Sweden. The text is mainly a translation of the article by Jonas Lindmark Morningstar, specialist at Morningstar. The most appealing point in the article to me was that it reflects best the most dominant approaches in Swedish spatial planning procedures: strict governmental regulation and control over construction rules, sustainable planning and participatory planning. The three aforementioned concepts are evident through importance and strong impacts of legislation, environmental measures and residents’ opinions on predominant planning routines:
Source: http://www.byggahus.se/artiklar/ar-din-tomt-vard-mer-huset
New planning regulations (proposition 2009/10:170) will come into force in Sweden in two months from now. One possible effect is an increase in provision of plots for villa construction which will in turn decrease land prices.
Normally, an increase in prices results in an increase in supply. In the case of land lots, however, a different rule governs: supply of land for villa construction in Sweden has fallen 30 percent in 2010 compared with 2008 while there is evidently a high demand. The number of constructed villas in recent two decades has nevertheless decreased to one third compared with the same time period before 1990.
The reason why municipalities are not that willing to assign land for villa are numerous and not without ambiguities: current regulations have made housing development a less profitable and more risky occupation; more strict environmental measures are being taken by authorities; more objections are made to construction permits by neighbors; many land owners hesitate to sell their lots in hope of higher prices – which is in fact a reliable forecast. Even the monthly rent earned after construction is not a sufficiently tempting motive for land owners to construct since land prices increase in a much higher pace than prices of the houses do.
The new planning and construction regulations aim at simplifying and speeding up the process of land assignment for villa construction. Nevertheless, interest rates in Sweden are currently so low that an access in land assignment for villa construction does not necessarily entail an immediate fall in land prices.
Experts from Building Administration (Boverket) and other responsible organizations believe that current situation will be followed by an increase in interest rates and the trend will persist until house prices are reduced down to construction costs. At the time land prices will start falling in a rapid pace just as they had been increasing previously.