Wednesday, April 30, 2014

Explaining Gentrification: Real Estate Bubble Trouble in Stockholm

The microeconomics of housing supply pale in comparison to the macroeconomics of housing demand at Pacific Standard magazine.

Theme: Globalization and gentrification.

Subject Article: "A Housing Surge in Sweden: Recent changes Sweden's tax system has attracted wealthy homeowners to the capital. But expect steep prices in Stockholm."

Other Links: 1. "Explaining Gentrification: Geography of Knowledge Hubs."
2. "Sweden's House Prices Have Tripled In Ten Years, But Is It Really A Bubble Waiting To Be Burst? Nobel Laureate Paul Krugman Thinks So."
3. "Scandinavia Is Looking Scary."
4. "Swedish Housing Surges to Unsafe Value as Debt Soars."
5. "East European oligarchs rush to snap up London property."
6. "The Chinese take Manhattan: replace Russians as top apartment buyers."
7. "Boston Mayor Looks to Skyscraper Housing to Forge Tech Capital."

Postscript: Don't shoot the messenger, "The High Cost of Geographically Illiterate Economists":

Prices on the San Francisco Peninsula won’t go down just because supply goes up. This one must just torture economists who continue to stare at their 2-D graph showing how demand always goes down when supply goes up. There are loads of factors that drive real estate prices. Sure supply is one factor. Here are a few others: proximity to employment opportunities, good schools, high-quality entertainment and other cultural amenities. Turns out the San Francisco Peninsula might be one of the best places to live in the entire world if your primary goal is to find a high-paying job near great Thai food restaurants and outdoor live music venues. People also like to live in places with great weather and they like a view of the ocean or the mountains or a lake or a park with trees and flowers. You know, the commodity you refer to as “open space”. Yes, people definitely like open space. Kids like to run around and play. Adults like to walk dogs. In fact, a regular dose of nature is good for our physical and mental health. The ability to conveniently access this type of open space is good for quality of life and when you provide a high quality of life this funny thing happens: people want to live in the vicinity and, voilĂ , housing demand and real estate prices go up.

Emphasis added. Geographers think about how people and places are connected across space. Economists analyze markets in isolation. What seems irrational to an economist, is perfectly rational to a geographer. When it comes to the demand side of the gentrification equation, economists (and urban planners) suck at geography.


Allen said...

This isn't fitting w/ today's theme. I thought of your stuff when I saw this. South Dakota needs skilled workers. They're having success with Dakota Roots but struggling to attract those w/out them.

Instead, he was shopping in the Twin Cities for something else — workers.

The South Dakota governor manned the Dakota Roots kiosk at the Bloomington, Minn., mall, taking his workforce message straight to Minnesota’s largest cities. He encouraged Minnesotans to move to his state, but he extended a particular invitation for former South Dakotans to return home.

Daugaard recounted the experience during Tuesday’s regional workforce summit at Mitchell Technical Institute (MTI). The Mall of America’s impact went far beyond the people stopping at the kiosk, the governor said.

“I knew I would be a spectacle and draw TV, radio and newspapers,” he said. “Our hit rates doubled for our Dakota Roots site (after the media coverage).”
First Lady Linda Daugaard also carries “Dakota Roots” cards with her everywhere, passing them out to former South Dakotans, he said.

Jim Russell said...

Nice find and thanks for bringing it to my attention.