The real estate market in our country is gradually starting to cool down, but in Sweden the housing market is in a real dip. A Swedish house now yields almost one fifth less than a year ago. At the Fantastic Frank real estate agency in Stockholm, they have to work much harder to keep the money rolling.
Swedish real estate agent Nermin Kuljanin has his earphones in and bangs his fingers on the keyboard. The view of the water in the center of Stockholm is beautiful, but Kuljanin ignores it. “I now have to work twice as hard as before to keep my income up,” says the 38-year-old Swede, who works for brokerage firm Fantastic Frank on a commission basis. “It takes two or three times as long to sell a home and I have to do a lot more to bring buyers and sellers together.”
Anyone who is concerned regarding the housing market in our country should take a look at Sweden. After years of price increases, prices there plummeted by an average of 17 percent last year. Sweden is leading in Europe.
The free fall affects Swedes who have to sell their house, but also real estate agents such as Kuljanin, who do not have a fixed salary. “I’ve been doing this for over ten years and rely on my network and experience,” he says. ‘But I see a lot of young colleagues quitting.’
From an interior magazine
For years it was hosanna on the housing market in Sweden. Prices shot up especially during the corona period, because many Swedes started working from home. Due to the particularly low interest rates, many buyers were able to take out higher mortgages, which drove up the price even more. “It was a matter of keeping an eye on the bids on your phone,” says Kuljanin.
The turning point came at the beginning of last year. Fantastic Frank’s turnover fell by almost 30 percent, says director Sven Wallén (58). His office is one of the best known in Stockholm and distinguishes itself by investing a lot of money and energy in the presentation of homes – for which it also charges a relatively high rate. ‘We were the first in Sweden to use photographers from the fashion industry and stylists. We want our clients’ homes to look like they came straight out of an interior magazine,’ says Wallén in his spacious office, where a bowl of fresh grapes is on the table and framed photos are placed almost spontaneously once morest the wall.
But while his salesmen now have to struggle to make enough money, no one needs to feel sorry for Wallén and his three associates. In the past four years, the four have exported their concept abroad. There are now fourteen Fantastic Frank branches in seven countries, including Germany and Denmark. There is not a crisis everywhere, Wallén sees. ‘In Lisbon the market is crazy, Dubai is growing like crazy.’
It was too easy
But in Sweden, the mood in the market is similar to the weather outside, it’s drizzling. According to Wallén, Sweden is now paying this price because it was too easy to buy a house, which drove the price up too high for years. For example, it was not until 2017 that it became mandatory to repay part of your loan. But even under the new rules, buyers only have to repay half of the loan amount in total. Stefan Ingves, former governor of Sweden’s Riksbank, warned in an interview this week that private debt is a threat to the economy.
An additional problem is that Sweden usually opt for a variable interest rate. That has resulted in favorable rates in recent years, but the downside is that today’s higher interest rates quickly translate into higher costs for homeowners. And that is on top of the increased energy prices and inflation of around 10 percent. “We need more barriers to buying a house,” says Wallén. ‘So the people who are now getting into trouble actually had too little margin in their income. That is not healthy.’
Mats Bergman, professor of economics at Södertörn University in Stockholm, has another explanation for the exceptional Swedish price fall. He points out that Sweden was relatively unaffected by the economic crisis in 2008, which brought the housing market in many European countries into a prolonged dip. ‘The housing market here only experienced a slump and prices then continued to rise as they had done since the early 1990s.’ The corona period formed a break with this gradual growth. “The price has now dropped to regarding pre-corona levels. So you can say that the situation has normalized.’
Paralyzed with fear
He expects the housing market to stabilize following thirty years of price increases. ‘In the long term, prices should even fall, because we don’t have a shortage of building land in Sweden. Anyway, the famous economist Keynes said it: in the long run we’re all dead, so I’m not sure.’
Wallén is more optimistic. He expects more work already in the spring. Now everyone is paralyzed with fear. The classifieds site Hemnet only lists rubbish. But I know it will pick up once more. Why? People die, people get divorced and have children. People always have compelling reasons to move.’
According to Wallén, there is no shortage of demand. ‘The population here is growing the fastest of all European countries. Because of immigration, but also because Swedes have many children. Sweden is the perfect country to raise children.’ According to him, the solution lies in more rental properties. A sign on the wall is that the waiting time for a rental home in Stockholm is twenty years. ‘Young people hardly ever get a home anymore. They are completely dependent on the help of their parents.’