The Swedish exception and the effect on house sales

Iris Rosa, a 33-year-old fintech developer, decided to move with her husband from their 45 sq m flat in Lidingö, an island in the Stockholm archipelago, to a house in Stallarholmen, a town an hour’s drive from the city centre.

“We love to live in Stockholm but we wanted somewhere bigger so family and friends can visit,” she says. Rosa is one of many former Stockholm residents for whom the pandemic has led to a re-evaluation of their housing situations.

Stockholm did not experience lockdown like any other large city. Setting itself apart from other European economies, Sweden refused to impose a full lockdown during the first wave of Covid-19, deciding to prioritise the public’s general health and economy instead.

In the capital, bars, restaurants and schools remained open. To this day, masks are rarely seen, indoors or outdoors. Theatre and film venues are running — albeit with limited attendance — and although more people are working from home than before, offices are still functioning.

‘The same old Stockholm’: people socialise aboard a floating bar at Strandvagen, Stockholm, last month
‘The same old Stockholm’: people socialise aboard a floating bar at Strandvagen, Stockholm, last month © AFP via Getty Images

“People are pretty much living the same [as before Covid-19],” says property agent Camilla Eggenberger. “People coming from the Berlin office say it’s like a breath of fresh air, it’s like the same old Stockholm.”

Unlike Paris and London, property viewings in Stockholm continued throughout the pandemic. The market did slow down initially as people were worried about the impact of the virus on the economy.

Stockholm map

Hans-Åke Palmgren, an economist at the Swedish National Board of Housing, Building and Planning, says the number of new-build flats being reserved by buyers declined in April and May. “But then it recovered in June,” he says, “and kept going up in July and August.”

Sweden has suffered more than 100,000 confirmed cases of Covid-19 and more than 5,900 deaths since the start of the pandemic, compared with about 35,000 cases in Denmark, 13,000 in Finland and 16,000 in Norway.

The country’s economy has also been badly hit — it reported an 8.3 per cent drop in GDP in the second quarter of 2020, comparable to Denmark’s 7.4 per cent drop but much larger than Finland’s, at 4.5 per cent, or Norway’s 2.2 per cent. In the UK, GDP dropped 20.4 per cent in the second quarter of this year.

The Bank of Sweden has kept interest rates low and banks have continued lending mortgages, keeping the property market going, says Peter Wiman, Savills’ head of research in Sweden.

One-bedroom flat, Östermalm,  SKr5.9m, Per Jansson
One-bedroom flat, Östermalm, SKr5.9m, Per Jansson

Between April and June, the average house price in the Greater Stockholm area was up 2.7 per cent on the previous quarter, and up 6 per cent year-on-year, according to government agency Statistics Sweden. Transactions increased too: in the second quarter, the number of houses sold in the capital was 4.6 per cent higher than the same period in 2019.

But gloomy economic indicators and the current rise in Covid-19 cases could initiate a slowdown in the housing market, with some experts describing the Stockholm property market as a “bubble” ready to burst.

A drop in GDP, more unemployment and the rise in Covid-19 cases could initiate a slowdown in Stockholm’s housing market
A drop in GDP, more unemployment and the rise in Covid-19 cases could initiate a slowdown in Stockholm’s housing market © Getty Images

“Until now the [decline in the] labour market has hit households that were not expected to buy new homes,” says Palmgren, “but if there is a slowdown in the production of more general goods, that might hit a wider range of people.”

Palmgren says housing construction dipped in 2020 from 14,000 to 11,000 new units, as developers faced tighter credit and anticipated a slower market. The country’s GDP is expected to drop 3.3 per cent this year, and restore its 2019 level only by the end of next year, according to the Bank of Sweden. Unemployment in September was at 9.2 per cent, up from 8 per cent in May.

“We don’t know how the economy will develop, but I think there will be uncertainty among consumers. They will be unwilling to buy,” says Palmgren.

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During the summer, while people have been unable to travel abroad for their holidays, some Stockholm residents have turned their attention to staycation properties. “The demand [for summer houses] was huge,” says Göran Skaghammar Selinder, a local agent at Högalidsmäklarna.

Emma Hevlund, a 38-year-old sustainability compliance specialist, bought a 110 sq m summer house this April in Österlen, a sunny green region by sandy beaches in the south of Sweden, for SKr2.9m (about £250,000).

Happy about the local art scene, the apple trees and the wide strands by the sea, she admits that having a larger place in the countryside is a nice alternative to international travel. “Instead of going to Italy, Spain or France, we remain in Sweden and have barbecues in the garden,” she says.

For Rosa, moving to the suburbs means being further away from potential coronavirus infections. “Our lifestyle will change a bit,” she says, referring to the quiet streets and the few bars in her new neighbourhood, “but things feel safer in a smaller city.”

Buying guide

  • Stamp duty is set at 1.5 per cent of the purchase price. Estate agent fees are about 3.5 per cent of the selling price.

  • Property tax is fixed at an annual rate of 0.75 per cent for houses, capped at SKr8,349 (€744) a year. For rental flats, the tax is 0.3 per cent. New properties are exempt from this tax for five years.

  • Swedish banks usually cover 75 to 85 per cent of the value of the house and there is a 2 per cent tax on mortgage loans.

What you can buy for . . . 

  • €566,000 A one-bedroom apartment in Östermalm. Through Per Jansson

  • €2.493m A three-bedroom waterside home with a two-bedroom guest cottage in Långstrandsudd, about 50 minutes from Stockholm. Through Per Jansson

  • €4.99m A luxury four-bedroom apartment in central Stockholm. Through Sotheby’s International Real Estate

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