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Housing market 'overheating' in big cities

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14:02 CEST+02:00
The demand for housing in Sweden's big three cities, Stockholm, Gothenburg and Malmö, has pushed the market to the verge of overheating with prices set to rise by 15 percent in 2013 according to a new report.

"Brokers are usually quite reliable and expectations are that a new price record will be reached by the end of the year with a price increase for the whole of 2013 to be around 10 - 15 percent. A somewhat stunning development considering the recession," Tor Borg, chief economist with Swedish housing lender SBAB, said in a statement.

The SBAB report revealed that the demand for houses and apartments in Stockholm in particular was much stronger than expected which took the market by surprise. Both Gothenburg and Malmö also experienced a heated up market which brokers believe is likely to continue.

Despite the system of an accepted price in place there was a significant difference between the starting and final sale price for three consecutive quarters according to the report.

However, the analysts said that the increasing rates were "unsustainable" in the long-term.

"Housing prices increasing by 10 percent per year is unsustainable. It is to be hoped that probably there will be a slowdown ahead when we go down to reasonable growth rates," said Borg.

Prices are expected to rise again in the fourth quarter based on the forecast by SBAB. Apartment prices in Stockholm will go up by a further 3 percent in Stockholm, 2 percent in Gothenburg and 1 percent in Malmö.

Tor Borg said that the figures masked another problem, namely that the cost of housing was affecting the larger economy.

"One of the biggest problems is the shortage of housing. Many times people cannot take a job in a big city as they have nowhere to live or they can't afford it. In the long run there is a risk that this affects the growth of the whole economy."

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The broker barometer carried out by SBAB bank was based on surveys done with more than 200 estate agents in the major cities.

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