While a fall in first time purchasers and stagnating sales levels are familiar problems in many other countries, Sweden has an additional problem: a high degree of regulation which some believe distorts its housing market.
For example, tax burdens play a major part in the culture of buying and moving. Until 2008 high annual property taxes based on size were said by some analysts to have deterred people from purchasing, but did at least incentivize turnover. As families grew up and children left home, parents would quickly downsize to smaller homes to reduce their annual property tax.
That regime has now been replaced by smaller annual taxes and a 22 per cent capital gains tax on all residential sales. As a result, people who have owned homes for many years – thereby enjoying substantial capital gains – are suddenly unenthusiastic about moving, even to a smaller and more appropriate property, because they will have to pay a large one-off sum.
Regulation is also heavy in the rental sector. In recent years most apartments have changed their status to New York-style condominiums, so they are governed by boards of owners within a particular block or estate. Any plan by an owner to let a unit to a private tenant has to be approved by the board – and in many cases, consent has been rejected for fear it may reduce the status or value of the block.
Even if approval is given, the rent earned on a privately-let apartment may be well below the market norm. This is because laws dictate that all rents should be comparable with those across a local area. Therefore an owner of a top quality unit has to levy a rent roughly similar to other, possibly lower quality units in the same part of town: failure to do means the tenant could appeal to a rent tribunal.
Amid the confusion, one small sector – holiday homes – is blossoming, thanks more international buyers.
The concept of the Swedish holiday home is different from that which exists elsewhere in western Europe. Most are cabin-style properties – often low value and sometimes lacking water or electricity – in rural areas and typically within a two-hour drive of the capital.
Estate agents say there are 500,000 such homes, predominantly Swedish-owned but with more recent buyers from Norway, Finland, Germany and even a few from the US and Russia.
Prices can reach £3,150 per square meter for the very best examples. With no restrictions on foreign property ownership, these are popular with overseas business people temporarily working in Stockholm and wanting holiday homes in Sweden after they leave.
However, Stockholm’s principal-home market remains almost wholly Swedish, for now at least, and may be about to become much more market-oriented should the downturn finally bite this year.