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Reader question: Should I buy now if I'm looking for a property in Sweden?

The Local Sweden
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Reader question: Should I buy now if I'm looking for a property in Sweden?
Photo: Fredrik Sandberg/TT

Property prices on the Swedish market are falling, so does that mean buyers need to act quickly to snap up a home? We ask an expert for some advice.

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“Making a decision on buying a house or apartment is a long term decision. Prices will go up, prices will go down," said Robert Bergqvist, a senior economist at Swedish bank SEB.

Bergqvist's analysis indicated that property prices will continue to fall during the autumn. He based his view on SEB’s housing price indicator in which they ask house owners in Sweden once a month a simple question of whether they think property prices will go up or down over the coming 12 months.

“Last month we saw a collapse in our indicator and that suggests that we should be prepared for a decline in the housing market”, said Bergqvist.

He pointed out there was a current mismatch in house prices between those selling and those who want to buy. 

Buyer's market

The majority of Sweden’s estate agents are also expecting a sharp drop in flat and house prices over the coming year, with most now calling a buyer's market.

“Prices will have to be adjusted downwards,” Johan Engström, the CEO of Fastighetsbyrån estate agents, told TT in June.

“At the beginning of the year, things still looked positive on the property market across the country,” he told TT. “Then Russia’s war in Ukraine came, followed by inflation, stock market turbulence, and increased interest rates, and it shifted. The market has seen a dramatic shift in a relatively short period.”

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Previously, sellers had a clear advantage. But according to Fastighetbyråns latest panel of estate agents, where Sweden’s estate agents answer questions on the state of the property market, it is now a buyer’s market to a much greater degree.

Engström also believes there is a mismatch in house price expectations between buyers and sellers in the current market.

“Sellers haven’t really adapted, rather they’re stuck in the ‘old market’ and the buyer in turn has other concerns and hears that the situation is completely different,” Engström told TT.

“Right now we’re seeing extremely clear signs that we have a market where buyers and sellers are far apart.”

To wait or not to wait?

However, this buyer's market doesn't necessarily mean it's the right time to buy for everyone - interest rates are going up, meaning buyers must be prepared if they continue to rise, Robert Bergqvist, senior economist at SEB said.

“If you wait it's possible you will get a better opportunity to buy a house," Bergqvist said. “But, if the interest rates continue to rise, will you have enough money to pay for those higher rates?"

Buyers therefore faced the conundrum of having to balance the fact that house prices were going down and interest rates on mortgages were going up.

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Long-term investment or short-term purchase?

For those planning on living in Sweden for a short while - such as foreigners looking to move to Sweden who aren't yet sure if they want to stay in the country permanently - it may be better to hold off on buying if possible, until the situation becomes more stable.

Another matter to keep in mind if you're thinking of buying an apartment in Sweden but aren't sure if you'll be staying for the long-term is that profit made from the sale of property is subject to capital gains tax – 22 percent of the profit.

That tax can be deferred if you're using the money to upgrade to a new house in Sweden or within the European Economic Area (EEA), but if it's elsewhere, you'll have to pay up. If you're coming from a country outside the EEA and are considering buying an apartment in Sweden before eventually moving back home, that's worth keeping in mind.

“On the long-term perspective we still have a housing shortage in Sweden. This should provide support on the long-term perspective for house prices," Bergqvist said.

In other words, even though house prices are currently falling, there will come a moment when they stop falling and start to rise again, he says.

Eventually, property prices should pick back up and make the investment of buying property worth it, although there's no saying how long it will take.

Buying a property in the current market is probably not a good way of getting rich quick, but it may prove to be a good investment if you'll be staying for the long-term and you can afford the higher interest rates and monthly fees.

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Don't wait too long to buy

In two to three years' time, Bergqvist hopes that the global economic situation will be such that the central banks, including the Swedish Riksbank, could cap interest rates and make it more favourable to borrow money again.

“In a few years' time there is a good chance that borrowing costs will come down," he said. "Hopefully we will see an end to the Ukrainian war and we should also see the rate of inflation going down”. 

That could lead to more people buying property and see an increase in the value of the housing market.

“Supply is lower, if you think about the amount of people interested in moving," Johan Engström, CEO of Fastighetsbyrån, told TT. Higher interest rates and lower demand for property is pushing prices down.

"When we’ve had a situation with extremely low interest rates, a high interest in property and many buyers interested in the same property, it pushes prices up.”

Basically, those waiting for the housing market to reach the sweet spot where prices fall and lending rates are low shouldn't wait too long, because it will be impossible to tell when this moment is, Bergqvist warns.

Buying a house is a long-term investment so if the right property in the right location is available then it could be worth buying now, he says.

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