Price freeze to follow 2009 property bonanza

Analysts expect a slowdown in the Swedish residential property market in 2010 following a year in which apartment prices rose by 20 percent amid record low interest rates.

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December saw a cool-off in the market as apartment prices came to a standstill and house prices dropped by one percent, according to figures released by property market statistics firm Mäklarstatistik.

Viewed as a whole, however, 2009 proved a bumper year for real estate agents as the price of apartments leaped by 20 percent and house prices saw a 10 percent increase despite a global and national economic crisis.

"The property market has recovered to a much greater extent than most analysts expected despite a difficult economic downturn and rising unemployment," Peeter Pütsep, CEO of the Svensk Fastighetsförmedling estate agency, told TT.

"This can be explained by major interest rate cuts; it really took off when the Riksbank announced in June that interest rates would remain at the record level for a long time."

Pütsep said prices had returned to pre-crisis levels in much of the country, though areas hit by high unemployment had seen a drop in property prices.

In the major cities, apartments sold like hotcakes in 2009, with several properties in Stockholm's fashionable Östermalm district selling for more than 100,000 kronor ($14,000) per square metre.

But smaller cities like Kalmar, Lund and Luleå also caught the price hike bug, with apartment prices up 30 percent on the previous year.

A period of rapid growth tailed off at end of the year, however, with prices stabilizing across the country in the last three months of 2009.

"I think this year we're going to see a less dramatic price development, with just marginal changes. But that's supposing the property market isn't hit by increased insecurity about the economy or spectacular tax proposals in the election campaign," said Pütsep.

"And even if the Riksbank does gradually raise interest rates, it's likely to happen in a series of small steps, which shouldn't really have a major impact on the property market," he added.