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PROPERTY

Swedish apartment construction takes off

Construction of new apartments in Sweden is approaching levels not seen since the height of the mid-2000s boom, with industry groups forecasting a need for thousands of new workers as a result.

Swedish apartment construction takes off
Hammarby Sjöstad in Stockholm sprung up in the housing boom

“New production of tenant-owner apartments is back at the high-levels from 2005 to 2007, in particular in greater Gothenburg and greater Malmö,” said Hans-Åke Palmgren of the National Board of Housing, Building and Planning (Boverket) to the Dagens Industri (DI) financial daily.

Increased optimism about the economy combined with a current housing shortage in Sweden’s major cities are two contributing factors to the housing board’s decision.

The agency’s new forecast is set to be presented on Thursday.

The Swedish Construction Federation (Sveriges Byggindustrier – BI) also expects a boost in the building sector. According to a recent forecast by the organisation, the sector is set to expand due to a steep increase in renovation investments.

The Construction Federation figures reveal a roughly 40 percent increase in the number of apartments under construction compared to last year.

At the same time, the construction of offices and other facilities has slowed or remains stagnant.

The current recovery underway in the Swedish economy is in the process of petering out, according to the federation.

Overall construction investment is expected to increase 3 percent in 2010 and 5 percent in 2011, which will lead to an increase in employment in the construction sector of up to 20,000 by the start of 2011.

However, the head of the Byggnads construction workers union, Hans Tilly, doesn’t believe the signs of a full recovery in the construction sector are all that clear, at least not across the entire country.

“We haven’t really noticed all that much other than there are lots of positive reports of various sorts. But even if the residential sector recovers quickly, there was basically a complete stop in the autumn of 2008. And recovering from a low point like that takes time,” he told the TT news agency.

During the financial crisis, the construction of tenant-owner apartments (bostadsrätter) dropped, while the building of rental units continued.

But now tenant-owner apartment construction has taken off again, according to Johan Deremar, an economist with the Construction Federation.

“Building companies think it’s hard to make money on rental apartments, the figures often don’t add up. It’s much more attractive for companies to build tenant-owner apartments,” Deremar told TT.

At the same time, construction firms believe they will need plenty of new recruits when the economy turns upward, in part because of a wave of retirements expected to take place in the coming years.

But the high number of people enrolled in construction training programmes is likely to protect against any labour shortages for firms.

“When it comes to tradesmen, we don’t see any shortage. On the other hand, there may be problems with foremen. Companies have a difficult time finding people who can lead work crews,” said Deremar.

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MONEY

How you can lower the monthly cost of your Swedish mortgage

It’s no secret that mortgages in Sweden have become more expensive over the last year or so, as interest rates have risen following high inflation. But did you know there’s a way you can lower your monthly mortgage cost?

How you can lower the monthly cost of your Swedish mortgage

Essentially, when you take out a loan in Sweden, the government gives you a discount on the interest you pay, in the form of a tax rebate.

This doesn’t include interest paid on all types of loans – for example, student loans are not included – but it does include your mortgage.

In order to qualify for the discount, referred to as ränteavdrag (interest deduction) or skatteavdrag (tax deduction), you need to fulfil some requirements: 

  • You’ve paid income tax and at least 1,000 kronor in interest in the last taxation year
  • You have a capital deficit (meaning that your interest costs must be greater than any capital income you’ve earned through interest or dividends)
  • You are either partly or wholly responsible for the loan or mortgage in question

If there are two of you who are both named on the mortgage who fulfil these requirements, you’ll each receive 50 percent of the total tax rebate.

The interest deduction is automatically subtracted from your yearly tax and listed in your yearly declaration, if you fulfil the requirements, meaning you’re likely to get it back as a lump sum when tax season rolls around in April.

How much do I get?

The actual sum you get back varies depending on how much tax and interest you’ve paid during the year, but there are some general calculations which can give you a guideline of what you might get.

You’ll get 30 percent of your interest costs back on the first 100,000 kronor you pay in interest over a year, and 21 percent on anything over 100,000 kronor. 

If there are two of you, you each have your own individual tax deduction, even if you’re paying the same loan, so as a pair you’ll get back 30 percent on the first 200,000 kronor, as well as 21 percent on anything over this figure.

To figure out how much you’ll get, you need to first find out how much interest you’ve paid during the year your declaration covers and subtract this figure from your capital income earned through interest or dividends.

If your figure is negative, that means you can subtract this figure from your tax paid during the year. Bear in mind that if you owe tax, then your interest deduction amount will be used to pay it back first, lowering the total amount you receive.

You can also change the proportion of the deduction applied to each partner if you share a mortgage, dividing it 60/40 or 70/30, for example, if you don’t share the mortgage 50/50. You can do this through your bank or by manually changing the figures in your tax declaration.

I don’t understand. How does this make my monthly mortgage payments cheaper?

Here’s where something called skattejämkning comes in. This literally translates as “tax equalisation”, and it’s a way you can spread your tax rebate for interest costs out over a year, lowering your mortgage costs each month rather than of getting a lump sum in the form of a tax rebate during tax declaration season.

In order to equalise your tax, you’ll need to contact the Tax Agency directly, filling out a form with the catchy title of SKV 4302 – Jämkning (ändring av preliminär A-skatt) or using their Jämkning online service.

To do this, you’ll need to have in-depth figures on things like your salary, pension payments, sick pay and any other income like unemployment benefit or maternity or paternity payments, as well as capital income and any business income for the tax year you’re applying for, as well as your expected income for the rest of the year.

If your application is accepted, the Tax Agency will tell your employer to subtract less tax from your payslip each month, effectively meaning that you get your tax rebate for interest costs back in your monthly pay instead of getting it paid out all at once.

Bear in mind that if you do go down this route it’s important that your calculations are correct. If you accidentally overestimate your interest payments or underestimate your tax owed, you could end up being hit with a hefty tax bill once your declaration comes through.

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