Sweden's full-scale boom
Last Updated: April 13, 2015
- In Greater Stockholm, house prices rose by 13.07% (13.31% in real terms)
- In Greater Göteborg, house prices increased by 7.22% (7.45% in real terms)
- In Greater Malmo, house prices rose by 4.50% (4.72% in real terms)
The highest house price increases in 2014 were in Gotland (33.08%), Västmanland (12.81%), and Kronoberg (11.11%). The lowest price hikes were in Skåne (0.66%) and Kalmar (0.70%).
During Sweden’s current housing boom house prices skyrocketed by 98% from 2000 to Q2 2008 (71% inflation-adjusted). After a short-lived decline from Q3 2008 to Q1 2009 due to the global financial meltdown, property prices started to rise again in Q2 2009. There was a dip from Q4 2011 to Q3 2012 amidst a sharp slowdown in economic growth, but house price growth resumed in Q4 2012 and price rises have been continuous since then.
Yields are moderate in Stockholm, Sweden
Swedish property yields are moderate. This year, we were unable to get yields figures because rents were hard to get in sufficient quantity to be reliable. When we surveyed them last year, mid-sized central Stockholm apartments (80 to 120 sq. m.) had the most generous gross yields, at 6 to 7%. Other sized properties seemed likely to have lower yields, at around 3 to 4%, and properties in suburban Stockholm also had relatively lower yields, at 3% to 5%, while apartments in the centre of the second-largest city of Gottenburg can yield around 5% to 7%.
Because rents are tied to the age of the property, the higher yields in the city-centre reflect partly the newer housing stock in those areas.
Generally, property prices in Stockholm vary in a range from €6,000 to €7,500 per square metre.
Round trip transaction costs on residential property are quite low in Sweden. See our Sweden residential property transaction costs analysis and Transaction costs in Sweden compared to other countries in Europe
High rental income taxes and CGT
Rental Income: Rental income is generally considered as business income and taxed at progressive rates. Income-generating expenses are deductible when computing the taxable income.
Capital Gains: Capital gains tax is levied at a general rate of 30%. Acquisition costs are deductible when computing the taxable gains.
Inheritance: Inheritance tax in Sweden has been abolished since January 2005.
Residents: Residents are taxed on their worldwide income at progressive rates.
Transaction costs in Sweden are low
Closing costs range from 7.26% to 9.26%. The buyer pays stamp duty (4.25%) and registration fee of SEK825 (€96). The seller pays the real estate agent’s fee (3% - 5%). When the buyer and the seller reach an agreement, the former pays a deposit ranging from 2% to 10% of the purchase price.
Strictly regulated rental market
Sweden’s rental market is strongly pro-tenant. The system is enormously counter-productive. Eight per cent of the Swedish population is queueing for a new apartment, with an average waiting time of 10 years
Rents: Rents are set far below reasonable returns-on-investment. Rents are little influenced by location, so that metropolitan units are especially under priced. The system is enforced by Rent Tribunals.
Tenant Security: Tenants have a right to prolong their contract, essentially for ever. The rule is totally asymmetric; a tenant may at all times give 3 month’s notice, even if the contract is fixed for a given period, to terminate the agreement.
In September 2006 the Alliance for Sweden, a centre-right coalition headed by Moderate Party leader Fredrik Reinfeldt, unseated the Social Democrat Party of Goran Persson. Since then, the housing system has been high on the agenda. An ongoing state review of the system argues for the removal of the current rental ceiling, so that private housing companies and individuals could set market rents.
Sweden’s economic recovery continuesThe Swedish economy has slowly but surely recovered from a sharp slowdown in 2012. In 2014, GDP grew by 2.1%, following GDP expansions of 1.6% in 2013, and 0.9% in 2012. Growth was helped by strong domestic demand during the first three quarters and by a significant rise of exports in the fourth quarter.
GDP rose by 2.6% (annualized) in Q4 2014, higher than the 2.3% growth in the previous quarter, according to Statistics Sweden.
In the next two years, exports, which account for about 47% of the economy, are expected to rise by 5% each year, according to the forecast of the National Institute of Economic Research (NIER). Stronger exports will be aided by the relatively weak krona and the global recovery, leading to GDP growth of more than 3% in 2015 and 2016. However earlier this year Sweden’s Finance Minister Magdalena Andersson forecast only 2.4% growth in 2015 and 2.7% in 2016.
"In the short term we see that growth in Sweden has still not really picked up. The slow recovery around the world is holding back growth in the Swedish economy," according to Andersson.
The country’s budget deficit was around 1.9% of GDP in 2014, according to Statistics Sweden. Central government debt amounted to SEK 1.715 trillion (€ 184.92 billion) in 2014, up from SEK 1.463 trillion (€ 157.69 billion) from the previous year. New reforms are planned to alleviate the situation, but Andersson has stated that introduction of tough austerity measures are currently inappropriate.
In February 2015 unemployment was 8.4%, higher than the 8% unemployment in both in 2013 and in 2014. In 2015 unemployment is expected to remain high at around 7.7%.
Consumer prices in Sweden rose by 0.1% annualized in February 2015, an improvement from -0.2% inflation rate in January.
The Swedish krona fell to a seven-year low against the pound and six-year low against the dollar in February 2015. However it strengthened in March, mainly against euro, due partly to large asset purchases by the ECB.
In October 2014, the Swedish Social Democratic Party under Stevan Löfven again returned to power in a coalition with the Green Party, albeit in a hung parliament, having won only 31% of the popular vote.