• Sweden edition
 

Buying a Swedish apartment: an auction by SMS

Published: 21 Mar 2007 17:41 GMT+01:00
Updated: 21 Mar 2007 17:41 GMT+01:00

Unlike the rental market with its long queues and little turnover, however, there are always apartments on the market. You just have to be willing to act fast, jump through a lot of hoops, and be prepared to shell out the cash.

Belgian Sige Goevaerts and his wife moved to Stockholm last year and spent four intense months house hunting. They looked at 50-60 apartments before they finally settled on one last November. He describes the whole real estate buying process as “an auction by SMS.”

In many parts of the world, the seller sets the price and then negotiates with potential buyers, with the final price landing somewhere in the middle. In Sweden, prospective buyers try to outbid each other – often resulting in a windfall for the seller.

“This does not exist in mainland Europe where my spouse and I come from. It’s just the opposite. The seller states a selling price and the interested buyer tries to get the price reduced,” says Goevaerts.

“The moment the bidding started, we realized that there was a huge difference between the initial quote and the final price,” he says. Goevaerts and his wife ended up paying 31% over the initial asking price.

Recently, a Swedish court found a real estate agent guilty of misleading potential customers with starting prices well below the market value of the property.

There are no laws regulating the bidding process in Sweden and the buyer has very few rights. As one American who recently purchased an apartment described it, “I have very little leverage in the process other than to say ‘no’ if the price gets too high.”

“In Sweden, only a written contract is binding for real estate, and that means that there is no guarantee that there are correct bids in the auction. The buyer has no rights at all in the auction process,” says Hans Lind, professor of real estate economics at the Royal Institute of Technology.

In addition to being tipped in the favour of the seller, the whole process is lightning fast. Showings are usually on a Sunday afternoon, and usually only last 30 minutes to one hour. And you’re usually not the only prospective buyer.

“It’s a very, very, very bizarre experience. Running around someone's apartment with 10 to 20 other couples at the same time doesn’t give you the best view of an apartment. Most often with shoe protecting plastics over your shoes, if you have not already taken them off,” says Goevaerts.

“As a foreigner, you often don't have the time to wait for your ‘bargain’ to show up. You have to get something as you need to get out of your second-hand rental,” he adds.

Bidding starts within a few days, and if the final price is satisfactory to the seller, the deal can be closed within the week. “In a week, normally the whole procedure is over,” says Goevaerts.

So why buy if there are so many pitfalls? Many people end up buying even if they’d rather not make such a large investment simply because of the lack of available rentals.

“When I moved to Stockholm six years ago, I didn't think I had enough money saved to buy an apartment. But when I discovered there was no decent rented accommodation to be found, I looked into the matter and found that with some money I had been saving towards a car, I had enough to buy a small two room apartment,” said Bryan Mosey, originally from England.

On the other hand, it’s also an investment that could pay off in the future. Being a buyer means that at some point you’ll be the one with an apartment to sell.

Lind says it’s quite common for people not to amortize (pay off the capital on) their home loans with the argument that prices will continue to increase. The capital is paid off to the bank when the apartment is eventually sold.

Mosey lived in his apartment for five years, during which time he renovated the living room and made improvements in other parts of the apartment, including adding a security door and new wooden flooring in the bedroom.

“The apartment sold for almost 150% of what it cost me originally and I earned my original investment back more than five times over,” he says.

Most of his profit went towards a new apartment, which he purchased together with his partner six months ago.

“Being newly built, the price was set at the signing of the contract two years before moving in. Since then, the market has continued to rise and going by recent sales within the area, the new apartment may already be worth 50-60 % more than it cost,” he says.

“If my partner and I were to sell today we would earn back our cash investment about four times over.”

In just the last twelve months, prices for an apartment in Sweden have increased by 13 percent in the last twelve months, according to Mäklarstatistik. Lind says prices have increased threefold in the last ten years.

But that may not last. Lind attributes the outrageous prices to the fact that “buyers make overly optimistic assumptions about the future costs.”

“Low interest rates and very strong income growth in Stockholm are the main reasons for increasing prices, but it might also be a bubble,” he cautions.

He says the academic opinion is that prices can be expected to fall soon and “perhaps rather dramatically if people start to be more pessimistic…about future costs, incomes, and prices.”

He recommends that prospective buyers make a sensitivity analysis of various situations, including a scenario where prices fall by 30% in the next three years.

“I think it is important to investigate the market carefully before entering this kind of auction. There is a rather large number of apartments for sale so one should not panic and get drawn into an auction with spiralling prices,” advises Lind.

“It is important to get a feeling about what the market price level really is and not overbid. Do not forget to check carefully what the monthly fee is and that the tenant-owner association (bostadsrättsförening) has a stable economic situation.”

Goevaerts also has a few tips for prospective buyers. “Determine your limit beforehand. You easily get carried away during the bidding,” he says.

He also recommends “getting your finances sorted out with your bank before starting the bidding.”

Finally, he suggests asking for a private showing of your prospective apartment when the bidding is coming at its end. “An apartment might look different without twenty other couples,” he says.

Links:

Description of the bidding process in English from the Swedish Board of Estate Agents (PDF).

Listings of real estate for sale (In Swedish):

Hemnet

Charlotte West (news@thelocal.se)

Today's headlines
Opinion
'Why were we kept in the dark for years?'
The submarine hunt is now in it's sixth day. Photo: TT

'Why were we kept in the dark for years?'

Military expert Johanne Hildebrandt tells The Local that the biggest question in the Stockholm submarine hunt hasn't been answered yet - why don't we know more about the "other operations" from the last few years? READ  

The Local List
Eight things to love about renting in Sweden
Apartments in Sweden are compact. Photo: Shutterstock

Eight things to love about renting in Sweden

A housing crisis means that short-term sublets are the norm in major cities and rent regulation rules are frequently flouted. But this week, The Local's decided to look on the bright side of renting an apartment in Sweden. READ  

Business & Money
Nordea banks big third-quarter profit gain
Nordea's Chief Executive Christian Clausen. Photo: TT

Nordea banks big third-quarter profit gain

Swedish bank Nordea announced on Wednesday a sharp rise in third quarter profits despite the economic slowdown and major outlays for an IT overhaul. READ  

National
Knutby priest faces early release from prison
Knutby in eastern Sweden, the scene of the murder. Photo: TT

Knutby priest faces early release from prison

A former priest in eastern Sweden who was sentenced to life in prison for organizing the murder of his wife has had his sentence reduced. READ  

Opinion
'Sweden will see Russia as a threat again'

'Sweden will see Russia as a threat again'

The Local speaks to one of Europe's leading security experts about why social media meant the Swedish military couldn't keep their 'submarine' search a secret and how she believes the country will ramp up its security against Russia. READ  

Interview
'Swedes are funnier than they think'
Comedian Al Pitcher has launched his new tour. Photo: www.alpitcher.com

'Swedes are funnier than they think'

New Zealand-born Al Pitcher launched his new comedy show in Stockholm this week. There wasn't a dull moment as The Local phoned up the man who has become one of Sweden's hottest comedians, while he took an eventful stroll in the capital. READ  

National
Stockholm suicide bomb investigation closes
The suicide bombing took place in 2010. Photo: TT

Stockholm suicide bomb investigation closes

Sweden's Security Service (Säpo) has announced that it will stop its core investigation into a suicide bombing in Stockholm four years ago. READ  

Stockholm 'sub hunt'
Military heads into 'new phase' in sub search
The search for the missing 'submarine' is now in its sixth day. Photo: TT

Military heads into 'new phase' in sub search

A press conference on the search for a suspected foreign vessel in Swedish waters revealed that the Armed Forces would be heading into a "new phase" on Wednesday, although it remained unclear what that might involve. READ  

Lifestyle
Vasa ship cannon blasted in Sweden
The bronze replica cannon. Photo: Beth Dacey.

Vasa ship cannon blasted in Sweden

A replica of one of the cannons present on Stockholm's iconic Vasa warship when it sank in 1628 is being tested for the first time in central Sweden. READ  

Health
Swedish farmers contracted swine flu
Swine flu can spread between pigs and humans. Photo: TT

Swedish farmers contracted swine flu

A human strain of the swine flu virus normally only found in pigs was discovered in Sweden earlier this year, the country's Public Health Agency has revealed. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
National
Vasa ship cannon blasted in Sweden
National
Sub hunt: Day-by-day
National
Sub hunt: Stockholm islanders share their fears with The Local
Sponsored Article
The best options for oversea transfers
National
Get 20% off unique Swedish homeware
Blog updates

21 October

Denna & den här (The Swedish Teacher) »

"?Denna? or ?den hr?? Swedish language students often ask question about different pronouns. One pronoun that especially..." READ »

 

19 October

Getting it (Blogweiser) »

"Follow Joel Sherwood on FB Few watch baseball in Sweden. This is excellent when your team loses..." READ »

 
 
 
National
Dentist gives free care to Roma beggars
Business & Money
Get your own office in Gothenburg or Stockholm - free for a day
Gallery
Property of the week: Malmö
Gallery
PHOTOS: 'Foreign activity' in Swedish waters
Gallery
People-watching: October 19th
TT
Society
QUIZ: How good is your Swedish?
Lifestyle
What's on in Sweden: October 17th - 24th
Society
The nudity... and nine other things expat men notice in Sweden
Gallery
People-watching: October 15th
Gallery
Your views: Should outdoor smoking be banned in Sweden?
Business & Money
Sweden has 'large hole' in finances
Sponsored Article
Introducing... Finding a job in Stockholm
Society
Monster salmon caught in northern Sweden
Gallery
Property of the week: Lorensberg
National
Scandinavia's child bride
National
Ebola crisis: How is Sweden preparing?
Business & Money
How Sweden is becoming a cashless society
Gallery
Stockholm Burlesque Festival 2014
National
How a little red horse became a symbol for Sweden
Gallery
People-watching: October 12th
Business & Money
The hottest start-ups from southern Sweden
National
What's on in Sweden: October 10th - 17th
National
Stockholm is 'best' region for well-being
Gallery
People-watching: October 8th
National
Five facts to know about Patrick Modiano
Society
My Swedish Career: A French fashionista in Sweden
Society
Swede's anti-bully Facebook tale goes viral
Society
Have you seen Sweden's viral subway cancer campaign?
National
Isis: Swedes linked to Turkish prisoner swap
National
Should Swedes be banned from buying sex abroad?
Gallery
Fredrik Reinfeldt's leaving presents
National
Five Swedish TV shows you shouldn't miss
Gallery
A tool belt, a casserole, and a book. Fredrik Reinfeldt's parliament gifts
TT
Lifestyle
Top five winter festivals in Sweden
TT
National
Sami reindeer herders win mine reprieve
Gallery
Property of the Week: Gamla Enskede
Sponsored Article
How to catch the first lobster of the year
Politics
Ten new minister faces you should know
Tech
First womb transplant baby in world born in Sweden
Gallery
People-watching: October 5th
National
What's on in Sweden
Team SCA
Sponsored Article
All-female SCA team takes off on Volvo Ocean Race
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

1,007
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
http://psdmedia.se
If you want to drink, that’s your business.
If you want to stop, we can help.

Learn more about English-language Alcoholics Anonymous in Sweden. No dues. No fees. Confidentiality assured.
AA-EUROPE.ORG/SWEDEN