High interest rates have put a damper on the real estate market in Sweden. Apartment prices are falling, developers have suspended many construction projects. The largest apartment rental company is facing problems. For Poles who want to buy a flat, this example may be soothing in its own way, because it may indicate that if the appropriate conditions are met, prices will also start to fall in our country.
The question of how real estate prices will behave is one of the most important economic doubts for the coming months. Since mid-2023, prices have been constantly rising and in the largest cities, two adults earning an average salary are not able to buy a square meter after adding their incomes – even with the unrealistic assumption that they spend their entire salary on the purchase of an apartment.
During the pandemic, Swedes eagerly bought apartments
However, the experience of our neighbors to the north proves that the real estate market may collapse and prices begin to fall quarter by quarter. Until recently, there were no signs of problems: house prices in rich and politically stable Sweden were rising year by year. A loan with a fixed interest rate was as popular as a loan with a variable rate – buyers were divided more or less equally when it comes to financing preferences (in Poland, until recently, few banks offered a loan with a fixed rate, so it is for new to us).
Increased demand for real estate was observed especially during the pandemic, when Swedes felt that their current apartments were cramped, they did not like them or wanted to move closer to the forest. Of course, this was not a Swedish specificity: Poles, Hungarians and Germans also began to critically analyze their housing situation during this period. According to Nordea Bank, house prices increased on average by as much as 30%. compared to the pre-2020 level.
Real estate in Sweden. High rates blew up the market
Everything changed quite suddenly and prices started to fall.
“Since November 2022, prices in Sweden have decreased by 13% nationwide. compared to the highest level in February. This is the biggest deterioration in the housing market since the great economic crisis in the 1990s,” said Gustav Helgesson, an analyst at Nordea, at the end of 2022.
What led to this?
Back in February 2022, the central bank (Riksbank) signaled that basic interest rates would remain unchanged at zero, and from the president’s statement it could be concluded that the first increases could only be expected around 2024. Three months have passed and the interest rate has been increased by 0.25%. This gave rise to an aggressive cycle of interest rate increases (aggressive in Swedish terms: at the worst moment the main reference rate was 4%, and in Poland – 6.25%). This had a ricocheting effect on the real estate market.