Background: One of the main social topics among fellow students today, particularly this close to graduation, is whether to buy or not to buy an apartment considering the high prices seen in today’s housing market. This together with ongoing discussions in newspapers about the presence of a housing price bubble have led to this thesis.

Purpose: The purpose of this thesis is to answer the question if a housing price bubble is present in the Swedish housing market or not. This is important from a policy point of view since the presence of a housing price bubble could lead to a financial crisis. It is also important from the consumers point of view since buying a house is a major investment for any household. Hence, the burst of a housing price bubble could have devastating consequences for the consumer who bought a house with a mortgage prior to a crisis.  

Method: The method used to answer to this question is based on panel data consisting of 19 counties over the period 1997-2015. The empirical approach is to test for cointegration and unit roots in the relationship between house prices and rents as well as the relationship between house prices and income, which leads to the construction of a price bubble indicator.

Conclusion: The results indicate the presence of a housing price bubble in 2015 which is confirmed by sensitivity analyses. The thesis concludes that today’s trend of increasing house prices may not last and prices could either stabilize in the years to come or a price bubble may burst.