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Why are one fifth of Swedish properties selling for below asking price?

Across Sweden, almost one in five properties sold below asking price in the first two weeks of June - almost as many as in summer 2020, just months after the outbreak of the Covid-19 pandemic.

Why are one fifth of Swedish properties selling for below asking price?
The new figures come from Swedish property site Hemnet. Photo: Fredrik Sandberg/Scanpix/TT

The downturn on the property market in Sweden is perhaps becoming more and more clear, with one in five properties selling under asking price in the beginning of June.

Rising interest rates from the Swedish central bank alongside high inflation is starting to make its mark on apartment and house sales. It’s not just affecting prices, but also leading to a larger number of sellers having to sell for lower than asking price.

Across Sweden, the percentage of sellers selling under asking price in the first two weeks of June amounted to 19.2 percent, according to statistics from property site Hemnet. This is almost as many as in summer 2020 (20.6 percent), when the market was affected by uncertainty over the Covid-19 pandemic.

“It’s a clear change,” Erik Holmberg, analyst at Hemnet, told TT newswire.

“The main factor is a market which is changing, and if we compare this to a year ago it’s a significant difference, where it’s become a buyer’s market.”

Record-high asking prices

Holmberg also said that in this type of situation, many who are looking to sell their home adopt a different strategy.

“We’ve seen record-high asking prices. Historically, it’s been the case that when the market becomes more cautious, there’s a tendency to put property on the market at a high asking price,” he said.

There are also clear regional differences. In inner-city Stockholm, where some of Sweden’s most expensive apartments per square metre are located, prices have dropped by almost exactly a fifth (20.1 percent). Last year prices in this area dropped by 4.7 percent, with a 12 percent drop in 2020 and a 9.9 percent drop in 2019.

Jakob Jakobssen, an estate agent at Widerlöv Stockholm, has almost 14 years’ experience in the property branch. He agreed that the situation has changed noticeably over the last six weeks.

“In general, I can say that buyers are more cautious and careful,” he told TT. “There’s a very low interest in advance viewings and very few properties are sold before viewing. Buyers want a more traditional viewing.”

Hard to match buyers with sellers

Another deciding factor is the fact that supply has increased drastically from the lower level seen around the beginning of the year until March. Now, the challenge is matching up buyers and sellers with each other.

“I’ve been an estate agent for a long time and been through downturns, like in autumn 2008 and in 2017, so I think I have the right tools to help buyers and sellers feel secure, but there are lots of newer colleagues in this branch who are having a hard time,” Jakobssen said.

“Maybe they started working when the market was on the up and they’re struggling to understand the situation the market is in right now.”

During the Covid-19 pandemic, different kinds of properties were affected in different ways, with larger apartments selling better than smaller ones. However, this time it’s affecting all properties equally.

“With the effects we have now such as rising index rates, rising inflation and drops on the stock market, it’s affecting all kinds of apartments, whereas during the pandemic, it was affecting different types of apartment in different ways,” he said.

“This is hitting the whole property market hard.”

However, Jakobssen believes the situation will be different after the summer.

“I think there’ll be more sales in August-September than there are now, but at a lower level. Sellers will have learnt by then that there’s been an effect on the market.”

 

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MAP: Where have house prices in Sweden fallen the most?

House prices in Sweden fell still further in July with the price of an apartment in Greater Stockholm now 12 percent down on last year's peak. Here's a map showing where prices have fallen the most.

MAP: Where have house prices in Sweden fallen the most?

According to Robert Boije, the chief economist at Sweden’s state-owned mortgage provider SBAB, the prices of houses and flats in Sweden could decline as much as 20 percent from their peak in the second half of 2021 before bottoming out. 

“An overall fall of 20 percent can absolutely not be ruled out,” he said in a press release. “But I don’t think we’re talking about a crisis like we had in the 1990s, but it’s clear that for individual households it could be pretty dramatic, however, with a fall of ten percent, if, for instance, you get divorced and need to sell your property.” 

The price of apartments has so far fallen slightly more than that of houses, with house prices only falling 11.4 percent in Greater Stockholm. 

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Over the last three months, the greatest falls have been in Greater Stockholm (Storstockholm), both for apartments (lägenheter) and for detached houses (villor).

Of Sweden's three biggest cities, prices have declined the least in the southern city of Malmö. 

See the chart below: 

Here is a chart of the price development over the last three months. Photo: TT/SBAB/Booli

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