Market value guarantee for new housing

Sammanfattning: The price development of housing in Sweden has long been a success story for sellers. With low interest rates, high demand and limited supply the prices have risen. Since the fall of 2017, the market uncertainty has grown. Prices are falling, demand decreases, and housing developers get harder to sell their newly produced homes, which in the long run can lead to reduced housing production. The potential reduction in production is a problem in Sweden because of the current housing shortage. Buying a newly created home by a developer differs largely from buying an already existing home by an individual on the succession market. The price is fixed (without bidding) and the agreement is often written long before access to the residence is granted. This report examines whether a new product in the housing market, the market guarantee, can lead to maintaining the production during times of uncertainty. Market guarantee is a product issued by housing developers to reduce uncertainty about the fluctuation of the housing prices during production. The product serves as a guarantee, which gives the buyer compensation for the value of the dwelling during the period between precontract and access. Buyers concerned about price falls are often afraid to commit to a newly produced home that they won’t get access to for a long time. The method of the thesis consists of a literature study and a qualitative study with the purpose of examining market guarantee's impact, risks and success factors. The qualitative data has been collected through an interview study with housing development companies operating in Stockholm and two of Sweden's largest banks. As with other assets, the price for homes varies. The housing market is characterized by periods of rising / falling prices which create cycles. During the period when prices rise uncontrollably, prices are characterized by overvaluation, the market strongly believes in continued price increase. When the market then turns into macroeconomic disorders, market expectations change completely and underestimate prices instead. The report shows that the need for the market guarantee exists when there is uncertainty in the housing market, which may vary depending on geographical location and customer segments. If the population is worried about price falls, they often wait to buy newly produced homes, to the greatest extent when there is a long time for access. This is largely due to psychology, the medias negative headlines have increased the fear of falling prices. In those cases, the market guarantee is a product that is needed, and is today the only solution that addresses the concerns about price falls. What speaks for that the market guarantee will have a positive effect on sales is that the guarantee addresses the psychological concerns of consumers by shifting the risk to the housing company, and the risk is also greatest at an early stage of the construction process. The report shows that in some cases the sales will be kept up, and thus also the production to a certain extent.