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Swedish house prices rocket faster than anywhere in EU

House prices only edged up slightly across Europe last year, but Swedes experienced a massive jump in the cost of buying a new home.

Published: 12 April 2016 16:37 CEST

Swedish house prices rocket faster than anywhere in EU

A viewing at a Swedish home up for sale. Photo: Tomas Oneborg/TT

The average cost of snapping up a house in the European Union snuck up by 3.8 percent during 2015.

However in Sweden the figure was a whopping 14.2 percent, putting the country top of a new table looking at property price hikes.

The data, released by the EU's number crunching agency Eurostat on Tuesday showed that Hungary (10.3 percent) and the United Kingdom (7.1 percent) were in second and third place.

Meanwhile the steepest falls were recorded in Cyprus, Italy and Croatia, which took the bottom trio of spots.

READ ALSO: Spring fever hits hot Swedish housing market

Sweden's position as a country where it's becoming increasingly tricky for young people to buy their first home emerged as the founders of Swedish streaming site Spotify identified the housing crisis as a core reason they could choose to grow their business in the US rather than Sweden in future.

Daniel Ek and Martin Lorentzon suggested that some international employees felt they had no choice but to buy a property because of Sweden's heated rental sector.

“To demand that young people who come to a new country should directly buy expensive condominiums reduces its attractiveness and is not sustainable in the long run,” they wrote in an open letter published on Tuesday.

Figures released last month show that despite some experts predicting that the real estate market would cool in the Nordic country 2016, the cost of both houses and apartments is once again on the rise as more and more Swedish house hunters line up to look for a new home in time fo summer.

Housing price inflation has resulted in Swedish households being among the most indebted in Europe. Mortgage holders on average have a debt that is 366 percent their annual income.

Swedish lawmakers announced last month that they were limiting mortgage loans to 105 years in a move designed to tackle both rising prices and debt levels.

Elsewhere in Scandinavia, house prices in Finland nudged up just 0.7 percent in 2015, according to the latest Eurostat figures, while Norway saw an increase of 5.4 percent and Danes experienced a jump of 6.5 percent.

INTERVIEW: 'Most foreigners in Sweden don't know they can get back excess rent'

More and more of the people asking the Swedish Tenants’ Association, Hyresgästföreningen in Swedish, for help with excess rent are foreigners, Sjölin told The Local in an interview.

“The problem is that if you’re coming from another country, and you’re subletting an apartment, you’re probably not familiar with the rules in Sweden, because in other countries, it might be okay to overcharge your tenants.”

He said that clients from India in particular seeking help from the association were now “very common”.

“Many people come here to work as engineers in the IT sector and then have to rent somewhere,” he said, adding that as a group Indians appeared to be “very aware of their rights.”

Sweden’s rental sector is heavily regulated, with first hand contracts negotiated between landlords and the Tenants’ Association, and the rent that can be charged for second-hand contracts limited to only a small fraction above what the first-hand renter pays.

“You’re not allowed to make any profit subletting an apartment in Sweden,” Sjölin explains. “You can only charge the subletting tenant the same rent as you [the first-hand tenant] are paying to your landlord, and then you can add the costs for internet and electricity, and perhaps a parking lot, if that is included.”

Tenants’ Association lawyer Roland Sjölin. Photo: supplied.

You can also add a påslag or “markup”, if you are renting out the apartment fully furnished, but this cannot exceed more than 15 percent of the rent.

That doesn’t mean that most landlords follow the law. The competition for rental apartments, especially in Stockholm, is so intense, that unscrupulous sublet landlords often try to get away with charging well over the legal amount, charging what is known in Sweden as ockerhyra, or “excess rent” and hoping that their tenants are too desperate to complain.

What many foreigners do not realise is that even after the rental period is over, they can still get back any excess rent they have paid by applying to the Rental Board or Hyresnämnden, which functions like a court judging rental disputes.

“If you have the evidence then it’s fairly easy,” Sjölin said. “I get a new case every second week on repayment of unfair rent, and I think that I win most of them.”

“Nowadays, you can get paid back excess rent up to 24 months back in time, so people tend to get more money,” he added. “In some cases, they can get 200,000 kronor. In other cases, perhaps it’s only 30,000 kronor or 60,000 kronor. It depends on how long you have rented the apartment, and how excessive the rent you’ve been paying has been.”

The first step is to establish what would have been a fair rent, either by asking your landlord what they themselves pay directly or by checking with the Tenants’ Association.

“Because we negotiate most rents in Sweden, we normally know what the firsthand rent is,” Sjölin explained.

Then you need to collect together your evidence.

“It’s a good thing to have a written contract and also papers from your bank showing that you paid rent every month, and perhaps photographs of the apartment, so the rental board can get an idea of the apartment you were renting and what would be a fair rent, and also the termination for the contract so you can show the court how long you’ve been living in the apartment.”

But Sjölin underlined that since Sweden has free burden of evidence, none of this is essential.

“Even if you’ve been paying in cash, if you have witnesses who can testify what you were paying each month, you still have a chance of getting your money back. It’s a bit more tricky, but I’ve won two cases like that this year.”

People in Sweden, he explained, tend to wait until the rental period is over before seeking to get paid back excess rent rather than challenging their landlord while they are still living in the apartment.

“You don’t have any legal protection for your home for the first two years, so if you bring the matter up with the person you’re renting the apartment from you risk losing your contract and having to move out, so most people wait until they’re supposed to move anyway,” he said.

If you apply to the rental board for a refund close to the day you move out, you can then make your landlord pay back all excess rent paid in the 24 months leading up to the date you contacted the rental board.

If you are a member of the Tenants’ Association, you can contact them and ask for help with your application, but there are also specialist companies, like Orimlig Hyra AB who will buy your case off you and give you a refund within 48 hours, saving you a long wait in exchange for a cut of the money reclaimed.

Sjölin said that the rental board normally took about 8 months to come to a judgement, but that if the person with the first hand contract appeals, that could extend the waiting time by between six months and a year.

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