'It's a great time to buy': Why Sweden's property market isn't bad news for everybody
Property prices in Sweden have been dropping since spring 2022, with rising interest rates, a higher cost of living and increasing inflation all putting pressure on homeowners. Are there any silver linings for prospective buyers?
“What we’re seeing now is that prices are relatively stable since spring after dropping substantially,” the deputy CEO of estate agents Svensk Fastighetsförmedling, Erik Wikander, told The Local.
Sweden's central bank, the Riksbank, has raised the country's key interest rate at eight meetings in a row, with the rate hitting 4 percent at the bank's last meeting in September.
“It’s clear that we’re now at or near the peak for interest rates, we’ll see if there’s a final hike to the key interest rate in November.”
Experts are divided on whether the bank will choose to raise the rate again at this month's meeting on November 23rd or whether it will choose to keep it the same for the first time since May 2022.
More and more experts are forecasting that interest rates will start to drop in the near future, which Wikander argues could be a good sign for prospective buyers.
“As far as timing is concerned I’d say it’s a really good time to buy a property right now.”
Buyer's market - but for how much longer?
Sweden’s property market has been a clear buyer’s market for a year and a half, Wikander said, but that might not be the case for much longer.
“We’re right on the boundary at the moment - it’s still a buyer’s market - but when we start to see the market picking up again then things will start to equalise.”
Things are unlikely to flip far in the other direction towards the “hyped market” Sweden experienced in the pandemic years, he added, but the situation should improve for those trying to sell property once things start to turn.
“I don’t think we should expect a strong rise in the market, like the hyped market we saw during the pandemic, which was a pure sellers’ market, but I think we can definitely expect a neutralised market.”
Still difficult for first-time buyers
For prospective first-time buyers who have enough cash saved up for a deposit - Sweden requires buyers to fund 15 percent of the house’s value in order to be granted a mortgage - now could be a good opportunity to take the plunge.
“From a historical perspective it’s easy to say that now is a good time to enter the market, if you have the economic means,” Wikander said, while underlining that prospective buyers still need to be able to afford both the deposit and the minimum mortgage repayments required under Swedish law, which in some cases can be as much as 3 percent of the home’s market value per year.
There are more properties on the market, properties take longer to sell, and there are fewer prospective buyers fighting over the same properties, not to mention the fact that prices won’t stay this low forever.
“We can expect prices to start going up at the end of 2024,” Wikander said.
Not necessarily a bad time to sell
This doesn’t mean that people trying to sell a property in the current market are choosing the wrong time to sell.
Most people in Sweden move homes because they need to - due to a divorce, relocation or new addition to the family, for example - which means that trying to time the market to sell at the best price is usually irrelevant.
“Most people don’t live in a speculative market.”
If you sell your home while prices are low, chances are you’ll be buying your new home at a low price, too, which makes it somewhat irrelevant to compare your sale with what others have sold similar properties for historically.
“The vast majority of people buy and sell in the same market,” Wikander said. “Whatever you lose by selling at a lower price than your neighbour did two years ago, you get back when you buy a new property [at a lower price].”
‘Much more predictable than before’
Interest rates over the past year and a half have for the most part been unpredictable, as buyers have had no idea when rates would stop going up and how high they would be at that point.
The situation is different for new prospective buyers, Wikander said.
“Your prospective living costs for the future are predictable in an entirely different way than they have been before.”
“If you look at the forecasts by all the economists at the large banks, they’re predicting that key interest rates will start to drop somewhere at the end of the second or third quarter [of next year].”
This means that potential buyers now have a much clearer idea of how much they will be paying higher mortgage rates and how long they will have to pay before prices start to go down.
“If you buy a property today, let’s say you have one to three months from when you sign the contract until you get the keys. In that case, you know you’ll be paying this higher cost for six months, maybe, then these costs will start to go down.”
This unpredictability of future living costs has been a major factor for buyers in considering whether to buy or hold off, and the fact that costs are becoming more predictable is only a good thing.
“It’s been largely unpredictable, and predictability is an important factor in a well-functioning property market,” Wikander said.
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“What we’re seeing now is that prices are relatively stable since spring after dropping substantially,” the deputy CEO of estate agents Svensk Fastighetsförmedling, Erik Wikander, told The Local.
Sweden's central bank, the Riksbank, has raised the country's key interest rate at eight meetings in a row, with the rate hitting 4 percent at the bank's last meeting in September.
“It’s clear that we’re now at or near the peak for interest rates, we’ll see if there’s a final hike to the key interest rate in November.”
Experts are divided on whether the bank will choose to raise the rate again at this month's meeting on November 23rd or whether it will choose to keep it the same for the first time since May 2022.
More and more experts are forecasting that interest rates will start to drop in the near future, which Wikander argues could be a good sign for prospective buyers.
“As far as timing is concerned I’d say it’s a really good time to buy a property right now.”
Buyer's market - but for how much longer?
Sweden’s property market has been a clear buyer’s market for a year and a half, Wikander said, but that might not be the case for much longer.
“We’re right on the boundary at the moment - it’s still a buyer’s market - but when we start to see the market picking up again then things will start to equalise.”
Things are unlikely to flip far in the other direction towards the “hyped market” Sweden experienced in the pandemic years, he added, but the situation should improve for those trying to sell property once things start to turn.
“I don’t think we should expect a strong rise in the market, like the hyped market we saw during the pandemic, which was a pure sellers’ market, but I think we can definitely expect a neutralised market.”
Still difficult for first-time buyers
For prospective first-time buyers who have enough cash saved up for a deposit - Sweden requires buyers to fund 15 percent of the house’s value in order to be granted a mortgage - now could be a good opportunity to take the plunge.
“From a historical perspective it’s easy to say that now is a good time to enter the market, if you have the economic means,” Wikander said, while underlining that prospective buyers still need to be able to afford both the deposit and the minimum mortgage repayments required under Swedish law, which in some cases can be as much as 3 percent of the home’s market value per year.
There are more properties on the market, properties take longer to sell, and there are fewer prospective buyers fighting over the same properties, not to mention the fact that prices won’t stay this low forever.
“We can expect prices to start going up at the end of 2024,” Wikander said.
Not necessarily a bad time to sell
This doesn’t mean that people trying to sell a property in the current market are choosing the wrong time to sell.
Most people in Sweden move homes because they need to - due to a divorce, relocation or new addition to the family, for example - which means that trying to time the market to sell at the best price is usually irrelevant.
“Most people don’t live in a speculative market.”
If you sell your home while prices are low, chances are you’ll be buying your new home at a low price, too, which makes it somewhat irrelevant to compare your sale with what others have sold similar properties for historically.
“The vast majority of people buy and sell in the same market,” Wikander said. “Whatever you lose by selling at a lower price than your neighbour did two years ago, you get back when you buy a new property [at a lower price].”
‘Much more predictable than before’
Interest rates over the past year and a half have for the most part been unpredictable, as buyers have had no idea when rates would stop going up and how high they would be at that point.
The situation is different for new prospective buyers, Wikander said.
“Your prospective living costs for the future are predictable in an entirely different way than they have been before.”
“If you look at the forecasts by all the economists at the large banks, they’re predicting that key interest rates will start to drop somewhere at the end of the second or third quarter [of next year].”
This means that potential buyers now have a much clearer idea of how much they will be paying higher mortgage rates and how long they will have to pay before prices start to go down.
“If you buy a property today, let’s say you have one to three months from when you sign the contract until you get the keys. In that case, you know you’ll be paying this higher cost for six months, maybe, then these costs will start to go down.”
This unpredictability of future living costs has been a major factor for buyers in considering whether to buy or hold off, and the fact that costs are becoming more predictable is only a good thing.
“It’s been largely unpredictable, and predictability is an important factor in a well-functioning property market,” Wikander said.
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