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Swedish apartment prices hit 'all-time high'

TT/The Local/vt · 14 Dec 2010, 11:00

Published: 14 Dec 2010 11:00 GMT+01:00

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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.

Story continues below…

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.

TT/The Local/vt (news@thelocal.se)

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Your comments about this article

11:46 December 14, 2010 by EP
It is quite common to own a few apartments in other countries. In Sweden, it's not that people don't, it's that people can't due to stupid BRF rules. You can only be a member of one BRF. Hence can't buy an apartment as an investment if you're an individual. Silly
12:16 December 14, 2010 by wabasha
I truly hate the swedish housing market. Median household income X 3(or less) should put you in a median priced home. well, the math don't work in Linköping!
12:39 December 14, 2010 by Nemesis
@ wabasha,

The math does not work in most of Sweden.

I have tried a few times to get around the legislation that stops people owning more than one partment, but have failed.

The only way around it would be to build apartment blocks and local kommunes will do everything to stop non-HSB ownership of an apartment block.

Anyone knows a way around it, I would be glad to listen.
13:28 December 14, 2010 by riose
@EP Do not say investment when you mean speculation.
13:48 December 14, 2010 by Tennin
There's been an apartment/housing shortage ever since I've been here, and also from before I got here. There was only one apartment building built in my kommun since I moved here. The prices for them were not worth it, with a couple of minutes drive away from centrum you can buy a house for the same price.
14:44 December 14, 2010 by Gefle383
The Housing market in Sweden is fine. Its a good thing that you can't buy more than one apartment as it keeps the speculative scum away. Look what happened in Ireland, every other person seemed to own an investment property or more, the economy wobbled and the whole thing came crashing down. You can't sell preoperty in Ireland at the moment for even half the price you paid 2 years ago. The Swedish system may seem odd to immigrants but it works.
15:15 December 14, 2010 by Swedesmith
Damn, I knew I should have kept the house we had in Sweden. Might be worth something now!
15:39 December 14, 2010 by JLondon
Im sure there are ways of buying more than one apartment
15:50 December 14, 2010 by kenny8076
pahahaha 1.4 million SEK for 17 square meters?!?! jesus we live in 29 square meters and i didnt think it was possible to get smaller!!! and for 200,000USD?!?! thats worst than most US cities!! housing in Sweden is a joke and they should be embarrassed......... they should quite posting all these headlines of lists with Sweden in first or top 5 and start posting the truth about this place!!
15:58 December 14, 2010 by Mib
It's not real money unless you move to a cheaper property or abroad if prices have not grown as much as in Sweden. So, it is an illusion for most people.

The new apartment buildings do allow people to buy a place and rent it out without the need for the building association's approval. However, older buildings are still restricted, but rumours that in the future this will be changed.
16:49 December 14, 2010 by rajind
i don't agree with you people. as the truth is some what different from what you see. high prices is because of high production costs. in 2009, the production cost for one sq.m is nearly 25000 ( areas in Stockholm) and the avg prod cost is nearly 19000 per sq.m. so now start calculating your apartment production costs.
18:22 December 14, 2010 by burlison
I know it's a different market and different economy, but do people ever admit that "oh yeah, it's a bubble"? Just saying....

Recall Alan Greenspan, circa mid-2005

"Although a 'bubble' in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.... Although we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications."
21:13 December 14, 2010 by gedw99
I agree with Rajind. The high prices are because of the high production prices.

Not because of "sentiment" in the market.

But why have the production costs gone up:

1. Root Deduction has meant that the laws of supply and demand have been screwed up by the Government interfering. Builders now have much more demand and so they raised their prices. But also now construction takes longer because of shortages, and so it goes.

2. Male of material supply competition. Anyone with a "f-Skat" amazing gets 30% of on everything initially. But if you ordering in bulk them it goes to 50% easily.

What do tou think this does to competition and start up builders that cant get the massive reductions. It forms a Cartel of apartment builders that have enough volume to get the large discounts. And what does this do in general to the market place for apartments - You have a Cartel of building companies.

3. Too much of a Cartel. There are only a handful of companies that are able to building apartment buildings.

4. Then there are the issue with the property laws. There is no incentive for building developers to build apartments when you have rent controls.

By manipulating the market forces you end up having Cartels.

Many of the points above self reinforce the others. Much like a self fulfilling prophecy.

What to do ?

1. Change the law on Rent controls to allow competition.

2. Change the law on Distinctions between 1st hand and 2nd hand contracts. That will clean up the whole black market very quickly because the laws of market forces will prevail
22:37 December 14, 2010 by mkvgtired
@riose, Every investment is a speculation, even government treasuries. US government 10 year treasuries are typically the rate used as the "risk-free" rate in any calculations. But it is only the strength of the US economy that backs these securities (or the USD). Without Germany, Greece would have defaulted on its gov ("risk-free") securities. My point is every investment, including holding cash, is speculation. One can use gold as an example as well, but what would people buy your gold off of you with if currencies failed? Failed currencies? And what gives gold its value, it only has limited industrial usefulness? The fact is everyone engages in speculation daily and there is nothing wrong with it.
00:05 December 15, 2010 by The Green Turtle
You can own more then one apartment but you cant rent- out or live in the second one. I guess you could renovate it and sell it for the profit?
00:49 December 15, 2010 by digitalamish

Ignorance is a bliss...

Yep, keep fooling yourself. 10 years wait-time on some government list to rent an apartment sure proves how the system works.

Sounds more like back in the good old USSR to me...
08:03 December 15, 2010 by riose
@mkvgtired Nope, an investment is placing money in a financial vehicle that return goods. That is a factory, a store or a hotel t.ex.(services are goods).

Buying a house hoping that the prices will go up is speculation. You produce nothing. No goods, no added value. (The same with gold as you say nowadays or with other commodities, like oil, in 2007)


The problem with speculation is that creates bubbles. That is why the governments should limit and control the market. Neo-liberalism died in 2008, and you can find its corpse searching for "Emergency economic stabilization act of 2008" or just looking at Ireland or Iceland.
12:48 December 15, 2010 by engagebrain
The problem in Stockholm is the black market.

This screws people who move into Stockholm and benefits those who don't live in flats they have a contract for.

This is illegal but for some reason, in law abiding Sweden, it is allowed to continue.

Why ?
22:22 December 15, 2010 by alecLoTh
Go to a small town with a nice beach and a good view. You can own the house and commute to work. I understand people arer bound to their jobs, but some arer good enough at the ir jobs to 'break free' and go it alone in their trades in a smaller place...just an option
06:43 December 16, 2010 by mkvgtired
That is not exactly true. Merriam Webster actually uses a property purchase as an example of an investment: "The outlay of money usually for income or profit : capital outlay; also : the sum invested or the property purchased"


Speculation can cause bubbles but it also is what sets prices, i.e. finding out what someone is willing to pay for an item. Investment and Speculation go hand in hand.
06:13 December 30, 2010 by juan123
Hello! what will be a legally ok rent for an apartment that I owned, and that I am paying the monthly fees to the bank for mortgage? If I pay to the bank 7000kr of capital and 500 of interest monthly and a avgift of 3000, it will be ok to charge a tenant 10000 for example? i do not want to get a legal complain later.
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