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Why so many overseas investors are buying property in Sweden

Swedish properties are experiencing record high interest from overseas investors, with areas outside the larger cities the most in demand.

Published: 17 September 2020 08:08 CEST
Updated: 2 October 2020 15:09 CEST
Why so many overseas investors are buying property in Sweden
Properties in Linköping, one of the smaller cities that has benefited from the rising interest. Photo: Lars Pehrson/SvD/TT

This year, the Swedish property market is expected to reach 170 billion kronor, which would make 2020 the third strongest year ever in Sweden, according to a new report from property consultancy Newsec.

Its authors believe the coronavirus pandemic has accelerated and strengthened several market trends.

“It is as if the market has jumped forward in time. During the year, several ongoing trends have developed at a pace that actually should have taken significantly more time,” said Max Barclay, the Nordic head of Newsec.

He said there are several explanations for the increased overseas interest in Swedish property. During 2020's first quarter, overseas investors represented 35 percent of deals on the Swedish property market, the highest proportion since before the 2008 financial crisis.

“The combination of allocating more money in property – because there are few alternatives – and the fact that the Nordics are seen to have coped better financially with the crisis than many other countries, means the international interest has never been greater,” he said. 

Another change which has been seen among overseas as well as domestic buyers is an increasing trend to buy property outside the major cities of Stockholm, Gothenburg and Malmö.

The market outside these areas has represented 46 percent of the total so far this year, up from 37 percent in 2019. 

Smaller cities like Västerås, Örebro and Linköping have become popular at a faster rate than predicted, partly due to the growing trend towards home-working, allowing workers to commute to the office only a few days per week or not at all, allowing them to live further from the major cities.

“This benefits the attractiveness of regional cities because they are a good alternative to major cities with lower prices and high quality of life,” said Barclay.

An analysis from Deutsche Bank's asset management arm, DWS, also noted the growing interest in Swedish property from overseas.

“The Swedish property market offers long and stable incomes in a key European  market. This is definitely attractive to international investers, especially in times like these,” said DWS analyst Simon Wallace.

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PROPERTY

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

In Sweden, people subletting apartments are not allowed to charge more in rent than they themselves pay. But foreign subtenants don't always know this. We asked Roland Sjölin, lawyer at the Swedish Tenants' Association, about how to get back excess rent.

Published: 18 April 2024 15:19 CEST
Updated: 21 April 2024 08:12 CEST
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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