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When worlds collide: Apartment shopping in Sweden and beyond

With flat prices dropping like autumn leaves, Jeanne Rudbeck thought it was about time to start shopping around for a new home in Stockholm. Or Paris. Or Florida. But was it all just a pipe dream?

When worlds collide: Apartment shopping in Sweden and beyond

When we moved here, Mr. Sweden, who always knows best, assured me that renting was better than buying. This was making a virtue of necessity: who could afford the exorbitant prices for a Stockholm flat anyway?

Besides, thanks to a severe housing shortage, scoring a rental within city limits made you automatically a Winner. A dysfunctional market, caused by Soviet-like restrictions on subletting, meant you needed connections, either to an apparatchik with the housing authorities or to a dealer in the black market–unless you parents had enrolled you on the housing waiting list before you were born.

Moreover, we lacked the pathological need to go into massive debt just to have our own roof to repair. Friends hinted that the reluctance to deal with sewage lines and termites was, if not quite a sin, certainly a sign of moral inferiority.

But with the bursting of the housing bubble came the nagging feeling that if one hoped to achieve the respectability of ownership, it was now or never.

Unwilling to abandon the bohemian insouciance of the renter but also wishing to become an upstanding member of the community–any community–we started searching for a city flat to buy in Sweden, France and Florida. I like to cast my nets wide.

When it comes to real estate, these are three different planets. In the US, the customer is king. The agent picks you up in a big German car and takes you to lunch. He spends weeks driving you around for viewings, chosen just for you.

In Stockholm the agent wants as little contact as possible with you. The typical apartment viewing lasts 45 minutes on Sunday when a horde of seekers wait on line, docilely remove their shoes and whip through the apartment in the crush of competitive buyers.

The Swedes are masters at what is known as Home Staging. Each flat has a red state-of-the-art espresso-maker in the kitchen and a white bowl of limes on the table. Was it the same espresso machine and limes, lugged from flat to flat by the agent? No trace of human habitation sullies the tasteful minimalism of the setting. The first question asked is, “har de gjort stambyte?”, which translates roughly as, “when was the last pipe system overhaul?”. This peculiar Swedish obsession with pipes was puzzling–until France.

In France, plumbing is not paramount. Queries about pipes elicited a baffled look and a diplomatic change of subject: had we noticed the majestic lines of the balustrade?

Although plumbing may not be a French priority, there is nevertheless plenty of kitchen sink realism. Literally. Dishes bearing remains from the last meal are often stacked up, waiting to be washed. This is, in its way, honest, showing what it looks like when real people live there. And they do. At one viewing the owner was stretched out on a sofa in her negligée watching TV, a dingy white poodle in her lap. Madame waved her cigarette in welcome and offered us a drink.

“The pipes appear to have burst” is the one indispensable French sentence. Finicky questions about those humid water stains on the ceiling were met with the trademark Gallic shrug and dismissed as “not a problem.” When the contents from your upstairs neighbour’s rotten pipes gush through your ceiling you simply go out and flag down one of the vehicles marked “SOS Plombier” which circulate the streets night and day.

But Mr. Sweden still had plumbing anxieties. Pressed to show us only places with renovated bathrooms, the agent found one that had been “conceived” by Philippe Starck, designer of the apartments of a French president. It boasted a sink made entirely of glass and a “rainforest shower.” We tested the shower. It rained. And it rained. We could not stop the rainforest rain. “Not a problem”: we trooped down to the street and waved over SOS Plumbers.

Unlike Sweden, in France sellers take the appliances with them when they move. An 86-year-old woman, however, was so eager to unload her Riviera apartment and return to Paris that she offered to throw her kitchen appliances into the deal. She proudly threw open her fridge door to prove it was in working order. Lined up like a small arsenal were 12 bottles of champagne and two of gin. The shelves in the door held a variety of pills that Apoteket would surely deny Swedish octogenarians. Nestled among the pills were jars of the most expensive Swiss and French beauty creams. There was no food.

Plumbing ceased to seem important. Surely a life popping corks on bottles of bubbly trumps sound pipes.

Speaking of popping bubbles, as housing woes deepen, approaches to selling are changing. In Stockholm there were only two people at a recent showing and the price had dropped by twenty percent.

Florida is holding a buy-one-get-one-free sale: two houses for the price of one. Hesitate and they’ll throw in a Lexus as an incentive. And in the most alarming sign of the meltdown yet, the French are considering Home-Staging.

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PROPERTY

Swedes have not been this pessimistic about house prices since 2008

House price optimism has taken a nosedive, according to the latest indicator report from Sweden's SEB bank. Sentiment among Swedes is now the most negative it has been since the 2008 financial crisis. What's going on?

Swedes have not been this pessimistic about house prices since 2008

How pessimistic are Swedish households? 

Very.

Households’ expectations for housing prices have fallen sharply this month, with SEB’s indicator dropping eleven percentage points in July, from -16 to -27, the lowest level it has hit since the financial crisis in 2008. 

The indicator, which has historically been a reliable predictor of house prices, turned negative in June for the first time since the pandemic hit in April 2020. 

The indicator is calculated by subtracting of the percentage of respondents who think house prices will fall from the percentage who think they will rise.

In July, the proportion of households surveyed who expected rising prices fell to 24 percent, down from 31 percent in June, while the proportion expecting falling prices rose to 51 percent from 47 percent. 

What is the reason for households’ pessimism? 

Américo Fernández, SEB’s private economist, told The Local that households in Sweden had reacted strongly to the decision of Sweden’s Riksbank central bank to hike rates, with most believing that the base interest rate would rise to 1.10 percent within a year.  At the same time, he said, households understood that inflation would reduce household spending power, making it harder for people to service large mortgages. 

“The result is not that surprising since inflation is on its highest levels since early 1990s and interest rates are increasing rapidly,” he told The Local. “These joint factors make it much more difficult for households to consume at the same high levels, meaning that they have decrease some of their consumption, and new mortgages and houses will be on that list.”.

He said it remained to be seen whether expectations improve again rapidly, as they did at the time of the pandemic, or would remain low. 

“Now the question is if this decline in expectations will turn around rapidly like during early pandemic (march/April 2020) or if it will continue in a negative slope like in the financial crisis of 2008.”

How badly has consumers’ spending power been hit by rate rises in Sweden? 

According to Christina Nyman, chief economist at Handelsbanken, a major Swedish bank, rising interest rates are already weighing on consumers’ buying power.

“For a household with loans of SEK 3m, this translates to additional costs of SEK 3,300 per month, which we believe is putting a cap on other consumption,” she said of the Riksbank’s rate increases so far. 

She warns in the bank’s most recent Global Macro Forecast that if the Riksbank speeds up its rate hikes, it could lead to a proper recession in Sweden.

“An acceleration of the rate-hike program could result in a drop in housing prices and a more severe recession,” she said.

Are we going to see a housing crash?

To qualify as a housing crash, home prices need to plummet by at least 15%, something which has not happened in Sweden since the 2008 financial crisis when prices in Sweden fell by as much as 20%, before rebounding gradually over the following years.

So far, it looks more like house prices in Sweden are set to decline more gradually, as there has been no new shock such as a stockmarket crash or banking crisis. 

How are homeowners responding? 

According to SEB’s report, 12 percent of households who currently have a fluctuating rate mortgage said in July that they are now planning to move to a fixed rate mortgage to avoid being hit by further rate hikes from the Riksbank, an increase of one percentage point from the June survey. 

The proportion who say they have already fixed the rate on their mortgage has risen by four percentage points to 37%. 

How might the average person be impacted?

Future buyers will profit from a drop in prices, despite all the suffering that frequently precedes a property catastrophe. On the other hand, the crash could be catastrophic for homeowners because they might have to sell their homes for less than what they paid.

Families who are forced to sell because they cannot afford their mortgage payments, for instance, or those who experience unemployment or illness, may therefore suffer significant capital losses.

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