"It's lucky that no one was in the area because it clearly would have been fatal," said regional police officer Hans Nilsson.
Although no one was injured, Håkan Larsson from Malmö's police force told TT the damage to the building was severe.
"There is quite serious damage to both the front door and inside the stairwell, to the elevator door and even to some apartment doors, which are safety doors," he said. "There's quite a lot of debris."
According to police technicians, dynamite was probably used to cause the explosion.
"A large stone went over a three-storey house on the other side of the courtyard and landed in a living room on the third floor of the building behind, about 80 meters from the site, so there has been a very strong detonation," said Hans Nilsson.
The alarm was first raised just before 1am on Friday, when several residents reported a loud bang.
Police closed off the area during the night while bomb technicians and forensics police investigated, but by Friday morning they had left the scene.
Nobody has yet been arrested in connection with the explosion.