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Nordic Update

Analyses are going awry

Publicerad: 19 Oktober 2018, 13:15

Are we building the right type of assets? It does not seem so to economist Peter Stein, pinpoints several challenges for the next term of office. “Builders and municipalities have remained obsessed with demographic flows, without matching them with income and demand flows,” he says.


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Peter Stein

Are we building the right type of assets? It does not seem so to economist Peter Stein, pinpoints several challenges for the next term of office. “Builders and municipalities have remained obsessed with demographic flows, without matching them with income and demand flows,” he says.

Never before has the population in Sweden increased by one million in just 13 years, but exactly that happened between 2004 and 2017. Last year, we reached 10 million inhabitants and the next limit, 11 million, will be reached in 2028. The rate of increase is accelerating in other words, but then slows down slightly. This according to figures from Statistics Sweden, SCB.

Economist Peter Stein explains that all variables affecting demographic trends pull in the same direction.

“We have high natural growth rates, substantial net immigration and an increase in average life expectancy,” he says.

SCB figures show that the number of immigrants currently outnumbers the number of emigrants. In 2012, the net migration rate, i.e. the difference between the number of immigrants and the number of emigrants in a given period, accounted for about 70% of the population increase, and in 2017 for about 80%.

“The key to integration is that immigrants learn the language, enter the labour market and get shelter,” says Stein.

The figures in the statistics are also boosted by the fact that there are more births than deaths in Sweden every year, for the simple reason that many people are at the age when having children is common, according to SCB. The forecast also shows that people live longer every year, and that the number of older people is increasing. With this in mind, Peter Stein is already flagging the fact that the demand for school buildings and nursing homes will thrive in the next few years, and calls for better anticipation.

“Discernment and judgement are two key issues for getting the planning right, but unfortunately many municipalities and builders are failing.”

What are the consequences?

“That the municipalities, in the worst-case scenario, must raise taxes, but still find it hard to find housing for young and old people.”

He explains that it is partly because their analyses rarely are based on demographic forecasts for relevant age groups.

“The analyses are too flawed. It is not enough to analyse demographics at the macro level, and the county level also provides limited guidance. Instead, analysis at the municipal level is needed to study relationships.”

It would, according to him, not hurt if more people particularly looked at the interrelationships between demographics and purchasing power.

“Many buildings have been built in the last few years for which there is little demand. Builders and municipalities have remained obsessed with demographic flows, without matching them with income and demand flows.”

For example, the age group 19 to 29 years will not continue to increase at a national level in the next few years, he points out. Although there are some geographical differences.

“In some parts of the country, the numbers will of course remain high. But this again emphasises the importance of doing such analyses at the municipal level.”

One possible solution would be that the state stepped in as a kind of upper unit of responsibility and simplified certain rules, including those relating to municipal land allocation, says Peter Stein.

“Subsidies are seldom successful, but a review of the regulatory framework can create better conditions, also in the existing stock, in terms of rent and so on.”

What can the construction sector do?

“Build buildings for which there is a demand in the next few years.”

Teresa Ahola

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Peter Stein

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