House prices affect consumption less than previous studies suggest
In a study published in the Journal of Monetary Economics, Roine Vestman and Jesper Böjeryd, researchers in economics at Stockholm University, examine how changes in house prices affect household consumption. The study is co-authored with Björn Tyrefors and Dany Kessel.
Jesper Böjeryd and Roine Vestman, Stockholm University.
A quasi-experiment around Bromma Airport
The study contributes to a large body of research analyzing the interaction between the housing market, the mortgage market, and the broader macroeconomy. A key challenge in earlier research has been to disentangle cause and effect, since both house prices and household consumption are strongly influenced by general economic conditions such as interest rates and unemployment.
To address this issue, the authors use a so-called quasi-experiment. When the operating agreement for Bromma Airport was extended in 2007, house prices near the airport’s noise zone grew more slowly than in the rest of Stockholm for a period of time. Houses close to the airport fell in value by around 20 percent compared with similar houses located farther away. This geographically limited price decline makes it possible to analyze the effects of changing house prices without being confounded by the overall business cycle.
The map shows the noise propagation around Bromma Airport along its runway, which stretches from northwest to southeast. The dark red area is referred to as the noise contour.
The link between house prices and household consumption
Using register data from Statistics Sweden on household car purchases, the study shows that households living near the airport, on average, buy a new car that is worth about SEK 14,000 less than households living further away. Across all households, this corresponds to only around 0.09 öre per krona of lost housing wealth – a markedly smaller effect than that found in most previous studies.
Moreover, the effect is concentrated among households with high loan-to-value ratios and limited liquid assets – that is, households that are more likely to finance car purchases by increasing their mortgage debt. Taken together, the results suggest that the link between house prices and household consumption is substantially weaker than earlier research has indicated.
About the stydy and the authors
The stydy, ”The housing wealth effect: Quasi-experimental evidence”, is published in the Journal of Monetary Economics, Volume 158, March 2026.
Roine Vestman and Jesper Böjeryd are researchers in economics at Stockholm University.
Björn Tyrefors is a professor at the University of Gothenburg and researcher at the Research Institute of Industrial Economics (IFN).
Dany Kessel received his PhD from the Department of Economics, Stockholm University, in 2018.
Last updated: 2026-01-29
Source: Department of Economics