Despite the extensive international interest in house price dynamics and the growing body of research in this area, until now it was not that evident what the fundamental factors are that determine house prices and what the size of their potential impact is on house price dynamics over the long run.

This study provides a systematic literature review of empirical studies on the fundamental determinants of house prices in advanced economies at the aggregated level. It is based on analysis of journal articles published in 58 top-tier housing, urban and real estate journals using bibliometric analysis. The synthesis on house price determinants involves 66 selected studies published in English during the last five decades (1973-2022) and represents a summary of the developments in the field of housing economics related to house price dynamics.

The results of the study suggest that most of the research on house price determinants employed quantitative methodology with a wide variety of econometric techniques. The study presents several key findings related to house price dynamics over the long run. Particularly, it defines fundamental determinants of house prices, classifies them in relation to the size of their elasticities and emphasizes the differences between them. In addition, the study describes the role of data sources as well as quality and modelling techniques, and discusses the impact of inflation, momentum, mean reversion and housing market efficiency. The study ends by assessing the outlook for potential extensions of the existing literature and outlines further research areas.

Purpose: This study examines the long term effects of macroeconomic fundamentals on apartment price dynamics in major metropolitan areas in Sweden and Germany. Design/methodology/approach: The main approach is panel cointegration analysis that allows to overcome certain data restrictions such as spatial heterogeneity, cross-sectional dependence, and non-stationary, but cointegrated data. The Swedish dataset includes three cities over a period of 23 years, while the German dataset includes seven cities for 29 years. Analysis of apartment price dynamics include population, disposable income, mortgage interest rate, and apartment stock as underlying macroeconomic variables in the model. Findings: The empirical results indicate that apartment prices react more strongly on changes in fundamental factors in major Swedish cities than in German ones despite quite similar development of these macroeconomic variables in the long run in both countries. On one hand, overreactions in apartment price dynamics might be considered as the evidence of the price bubble building in Sweden. On the other hand, these two countries differ in institutional arrangements of the housing markets, and these differences might contribute to the size of apartment price elasticities from changes in fundamentals. These arrangements include various banking sector policies, such as mortgage financing and valuation approaches, as well as different government regulations of the housing market as, for example, rent control. Originality/value: In distinction to the previous studies carried out on Swedish and German data for single-family houses, this study focuses on the apartment segment of the market and examines apartment price elasticities from a long term perspective. In addition, the results from this study highlight the differences between the two countries at the city level in an integrated long run equilibrium framework.

New residential construction in many countries with rapid urban growth is often interrelated with smaller housing units being built. Sweden is not an exception. It is of interest to investigate the driving forces behind this tendency. Our presumption is that municipal land price policies and building permit regulations might play a certain role in this process. Contrary to previous studies that focus on the number of new dwelling units in housing construction, our purpose is to analyze the average size of new housing units and the factors that affect it on an aggregate level. We apply seemingly unrelated regressions for analysis of the average apartment size in new residential construction in the three largest metropolitan regions in Sweden as a function of the changes in population, apartment rent and prices, mortgage interest rates, land prices, and building permits per capita as a proxy for regulation. The unbalanced panel dataset includes the period between 1998 and 2017 and covers both the rental and the housing cooperative sectors. The analysis demonstrates that land prices and building policies along with market fundamentals are the underlying factors that affect the average size of an apartment in new residential construction in Sweden.

Since the size of the homeownership ratio differs significantly between countries, it is important to understand the mechanisms that lie behind the decrease or growth of certain sectors of the housing market such as rentals and housing cooperatives. The aim of this study is to analyze the long-term dynamics of the new residential supply in Sweden's three largest cities for the period of 1990-2020 and estimate in what way market fundamentals affect it through new construction and housing conversions. We apply panel data methodology and, in distinction to previous research, consider the development of the housing market (urban growth) as physical volume. The results demonstrate that structural changes are driven mainly by fundamental demand factors and that the displacement effect occurs primarily in the market's rental sector and not in the owner-occupied segment. The apartment price per square meter, together with mortgage interest rates, are the major driving factors in the process of converting dwellings into housing cooperatives. Fundamental variables that affect new construction in both the rental and housing cooperative sectors are population and income growth. In the presence of a rent control environment, the rent or price level does not contribute to adding new units to the total housing stock.