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'Property bubble' warning over apartment price rises

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13:11 CET+01:00
The average price of apartments sold in Sweden has risen by 13 percent over the past year. Now experts are warning that the property market could be heading for a price bubble.

Cecilia Hermansson, head of prognoses for Swedbank, one of Sweden's biggest lenders, warned that the rising price of apartments was particularly worrying.

"A price rise of 13 percent 12 months is a lot," said Hermansson.

"Now that the Riksbank has said that interest rates will remain as they are at relatively low levels for a long time, there is a great risk that the price rises will gather steam," she said.

Following the last interest rate rise in mid-February the Riksbank, Sweden's central bank, said it expected not to raise rates significantly in the near future.

"The Riksbank's most recent communication and interest rate prognosis is not good for price developments on the housing market. The risk of a property market bubble has increased," she said.

House prices increased by 5 percent over the past 12 months, something that Hermansson said was normal and not a matter for concern.

It is the price of tenant-owner apartments, particularly in the big cities, that worries analysts. According to figures from Mäklarstatistik, the sale price of an average apartment in central Stockholm is now 48,776 kronor per square metre, or 3 million kronor for a large one-bedroom apartment.

Apartment prices in the capital are up 10 percent in the past twelve months.

The average price of a house in Sweden is now 1.727 million kronor, and prices are expected to continue rising over the next few months. Apartment prices are also expected to keep going up.

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