Swedish apartment prices hit 'all-time high'

Prices for apartments in Sweden have climbed to their highest levels ever in the last quarter, a property agency has revealed.

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Although the cities of Malmö and Stockholm had the largest price increases in November, estate agency Fastighetsbyrån does not believe this is evidence of a housing bubble.

The prices of tenant-owner apartments (bostadsrätt) have slowly but steadily climbed climbed to an all-time high over the last year, fuelled by the housing shortage in metropolitan areas driving up prices.

"It is an effect of relatively slow growth over the year. There has not been any sudden changes in prices. However, they have never previously reached these levels," said Fastighetsbyrån CEO Lars-Erik Nykvist.

The prices of apartments rose in November by 1 percent. In central Malmö, prices increased by 5 percent, while in central Stockholm, they grew by 4 percent.

The rise in Stockholm flat prices is exemplified by a recent listing for a 17-squre-metre apartment on Alströmergatan on the island of Kungsholmen which sold in mid-November for 1.4 million kronor ($206,000), which corresponds to 82,000 kronor per square metre.

Another example from Stockholm is a ground-floor flat on Hälsingegatan in the Vasastan district totalling 35 square metres which recently sold for 2.66 million kronor, or 76,000 kronor per square metre.

On average, apartments in central Stockholm currently feature a per-square-metre price of 60,000 kronor.

The reason behind the continued price rise is the combination of strong demand and low levels of new construction.

However, Nykvist did not believe that housing prices will rise as rapidly in the future. On the other hand, he also does not believe a housing price collapse is likely, saying the phenomenon is not a housing bubble.

"All the arguments for a housing bubble are on track, but a good counterforce is that very few own homes for speculative purposes. It is quite common in other countries for someone to own two or three apartment in central locations," he said.

Swedish legislation, which in other contexts may appear both old-fashioned and rigid, makes it impossible to buy an apartment if one does not live there.

"It also means that downward changes in the housing market affect other areas of consumption more immediately. One must have somewhere to live," said Nykvist.