What is the impact of macroprudential regulations on the Swedish housing market?

Housing shortage and urbanization have led to higher housing prices and larger household debt. In order to control the growth of debts, Sweden's financial supervisory authority has introduced several borrower-based macroprudential tools in the last ten years. In 2010, a mortgage loan to value (LTV) ratio was introduced, and in 2016, amortization of 1 percent of the loan balance was mandated by the law if the mortgage was higher than 50 percent of the value of the property. Furthermore, in 2018, the amortization requirement was tightened as all households with a mortgage larger than 4.5 times the annual income was forced to amortize 1 percent of the loan balance. The question is whether the financial supervisory authority's use of macroprudential tools had the intended effect. We are combining a hedonic regression modeling approach with a regression discontinuity design in order to estimate the causal impact on house prices. The effect of the macroprudential tools is estimated on the single-family housing market as well as on the cooperative apartment market. We are using microdata of 1 million housing transactions over the period 2008 and 2019. Our estimates indicate that the amortization requirement in 2016 has a negative impact of around 7 percent on the Swedish housing market and a slightly lower impact of the 2018 amortization requirement. The 2010 LTV-ratio requirement did not have any impact on the prices of dwellings.