Swedish Housing Market Faces Divergent Trends as Negative Interest Rates End
The end of Sweden’s negative interest rate period is causing apartment price declines in most municipalities, with central Stockholm rebounding, amid government plans to ease loan rules.
- • Negative interest rates ending after ten years is impacting housing affordability and prices.
- • Apartment prices are below 2021 levels in 125 of 179 Swedish municipalities; 39 have declines over 10%.
- • Central Stockholm’s housing market is recovering faster, with quick sales and prices near 2022 peaks.
- • Government plans include relaxing amortization rules and increasing loan-to-value ratios to support buyers, risking increased financial vulnerability.
- • Young first-time buyers with high debts are most affected, facing potential losses of entire down payments.
Key details
Sweden's decade-long era of negative interest rates, which made borrowing exceptionally cheap, has concluded, profoundly impacting the housing market. While central Stockholm is witnessing a rebound in apartment prices, nearing their February 2022 peak, much of the rest of the country struggles. According to an analysis from Swedbank and Sparbankerna, 125 out of 179 municipalities report apartment prices below 2021 levels, with 39 municipalities experiencing declines exceeding 10%. Private economist Arturo Arques emphasizes that many buyers from 2021 are seeing significant losses, particularly young first-time buyers burdened with high debt seeking short-term investment returns. In stark contrast, apartments in Stockholm sell on average within just over two weeks, with 90% achieving at or above asking price, but sales in suburban areas are prolonged, often extending beyond two months with many properties selling below asking price.
Looking ahead, the Swedish government plans to propose relaxing amortization requirements and increasing the maximum loan-to-value ratio from 85% to 90% this spring. While these measures may invigorate home buying and drive prices up, Arques warns they could exacerbate financial risks, as a 10% drop in property value might wipe out a borrower's entire down payment under higher loan ratios.
This split housing market reflects broader economic uncertainties following the end of cheap borrowing, with central urban markets showing resilience contrasted against fragility in outlying regions, posing distinct challenges for policymakers and consumers alike.