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PROPERTY

How to analyse a Swedish housing association’s finances before you buy an apartment

When you buy an apartment in Sweden, you're usually actually buying into a housing association (bostadsrättsförening), and it's crucial to understand the state of their finances to make sure your investment is secure.

How to analyse a Swedish housing association's finances before you buy an apartment
There are several numbers to get your head around before you bid on a Swedish apartment. Photo: Ali Lorestani / TT

Overview

You can check the website Alla BRF which gives information about each BRF and gives them an overall grade from A++ (meaning the finances are in the best possible state) to C; these grades are often shown on property site Hemnet too. 

Two other helpful signs should also be available on the apartment ad (bostadsannons) too. You should be able to check how many apartments are in the association (antal lägenheter). Although this may not sound like it’s directly related to finances, it is, and there are pros and cons to different sizes. Joining a small BRF (for example, 20 apartments or fewer) means you will be buying a large share of the association, and therefore could be more vulnerable to any increases in debt or interest rates.

You should also check if the association owns the ground on which it is built (äger marken) or if it rents this (tomträtt). In the latter case, find out when this ground rent will next be reviewed – these rents are usually set by the municipality and non-negotiable so any future increase could be passed on to you as an apartment owner.

But for more detail, you need to look at the årsredovisning, the association’s annual financial report. These should be available online if you search for the BRF of the property you’re interested in, and if not, copies should be available at the viewings or you could email the estate agent to ask to have one emailed to you in advance.

Loan per square metre (belåning per kvadratmeter)

This is one of the most important figures, and it might be written in the report itself, or if not, you can calculate it by dividing the association’s total debts (skulder) by the total living area (total bostadsyta) in the association.

In general, a loan per square metre below 5,000 kronor is considered a positive sign while over 10,000 is concerning, although most newly built apartments will have loans per square metre between 10,000-15,000, because they will have taken on debts to finance the build and not yet had time to pay them back. For a newly built apartment you need to look at a slightly different set of criteria, set out in the association’s financial plans. But this is why debt per square metre of over 10,000 kronor is considered a bad sign: this is standard for a brand new apartment block, so in one that’s a bit older, you would expect a responsible association to have amortised its debts over time. Some old, well-run associations are completely debt-free.

As for why a high figure is a problem, it’s because the association is vulnerable to economic changes. If they have high loans, that means a high proportion of expenses are interest payments on those loans. Sweden currently has low interest rates, but this could change and if it does, associations with high debts will see their costs increase significantly. For example, if you have a 75 square metre apartment and the association had loans of 6,000 kronor per square metre, that would mean your share of that interest would be 375 kronor per month at an interest rate of 1 percent, paid through your avgift. If interest rates rose to 2 percent, your avgift could be expected to increase by another 375 kronor. But if your association’s debt per square metre was 10,000 kronor, that would be a monthly cost of 625 kronor for the same sized apartment. Note that the avgift covers more than just your share of the association’s debts, including running costs, but this illustrates why the debt is so relevant. 

You should also look back at previous annual reports: is the loan per square metre steadily decreasing over time? That’s what you want to see, because it’s a sign that the association is managing its finances well (although repairs and renovations usually mean increased loans, so check if there’s a clear reason for any rises).

Another calculation you can do is to find out the debt ratio by dividing total loans (lån) by turnover (omsättning). A ratio under 5 is generally considered very good, and over 15 very bad, with many associations somewhere between 5 and 10.

Photo: Gunnar Lundmark/Scanpix

Avgift

One of the figures to look at is the monthly avgift, a fee for services and utilities provided by the BRF. Here, there are a few things to bear in mind. To begin with, see how high the fee is compared to apartments of a similar size, and calculate what this would mean for your monthly costs. A lower monthly cost is always attractive (and if it remains low, should help you when you come to sell), but don’t forget that this is only a small proportion of your total housing cost – saving 1,000 kronor each month on these fees will only save you 12,000 kronor over a year, a tiny amount compared to the total cost of an apartment. 

When doing these comparisons, don’t forget to check exactly what’s included with the fee so that you’re comparing like with like. For example, does it cover water (hot and cold), internet, and are there any perks you’d expect to pay extra for like a shared gym? Or are there any downsides, for example if the association saves money on cleaning shared areas by asking residents to do this themselves? When you go to viewings, take a look at common areas, the upkeep of the building itself, and gardens or courtyards, to see how well maintained they are. If it looks like a lot of work is needed, a low avgift could actually be a warning sign that this has been put off.

You can look at the history of the association to try to identify patterns, for example if the avgift has been raised each year, or if the association has been doing so well that it’s been able to lower the fee or even offer residents avgift-free periods. Just bear in mind that a low figure is no guarantee for the future. If the association plans to carry out major works in the next few years, they will need to take on debts and the avgift could be raised to cover it. The same is true if other parts of the association’s finances are affected; if a business renting a unit leaves and is hard to replace, or if the cost of ground rent rises, your fee could go up, but on the other hand you could see the fee reduced if the association finds new ways to add to its income or if it has steady, low debts. That’s why it’s important not to look at any one figure like the avgift in isolation, but get an overall feel for the association’s financial health. A low fee could mean that the association has low costs and a large fund ready for future renovations, or it could mean that they have amortized their loans at a slow rate and will be in difficulty when repairs are needed.

Vulnerability to interest rate increases

You will also want to find out what proportion of the association’s income is taken up by paying off interest. To calculate this, find the income (nettoomsättning or sometimes just intäkterna) and find out what percentage is used on interest (räntekostnader). In new builds, this is often around 40 to 50 percent, again because these associations have recently taken on significant debts and not yet had time to pay them off or earn income. In older associations, you should look for a lower proportion, with anything less than 20 percent a very good sign.

Upcoming renovations

You should also look at how much money the association has set aside for future repairs and ongoing maintenance, and whether anything specific is planned over the coming years – and how much this is likely to cost. As a rule of thumb, housing experts tend to say that 150 kronor per square metre of living space is a safe amount for an association’s maintenance fund, plus more for bigger projects. As well as asking which repairs are planned, take a look at the standard of upkeep, including seeing any communal areas like laundry rooms or guest apartments, and checking the state of the building facade and stairwells.

But don’t forget that some planned repairs could make the apartment and the building more cost-effective, for example fixing windows or ventilation (potentially improving insulation and reducing heating bills) or improvements to make the building more attractive. It’s certainly not a bad sign if the association has planned improvements, especially if these have been well budgeted for and will improve your life in the building, and possibly make the home more attractive when you come to sell it in future.

Photo: Claudio Bresciani/Scanpix

Income sources

A lot of the figures explained above take into account association costs, but you also need to think about how the association brings in money. In some associations, some apartments are hyresrätter (rental contracts) which could be a future source of income if those apartments are ever sold – though that may never materialise. Find out which businesses, if any, rent premises from the association and how long those contracts are agreed for, as well as asking about other sources of income.

If in doubt, ask

Buying an apartment is a big commitment, possibly even more so in a foreign country where things like currency fluctuations and your ties overseas may add additional uncertainty.

The bidding and buying process moves fast in Sweden, but don’t let yourself be rushed. Make sure you are prepared for the viewing by reading the årsredovisning (a copy should be available at the viewing too, but if you read it in advance you can use the viewing to focus on the physical features of the apartment) and preparing any questions.

The estate agent should have answers to the main questions, but you can always ask to speak to a representative of the housing association’s board (styrelse). Then you can ask for more detail about any planned renovations, any planned changes to the avgift, and even how active the board is.

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PROPERTY

How do I prep my apartment for sale in Sweden?

Here's the first part of The Local's new property series from reporter Becky Waterton, who is currently going through the process of selling her apartment: how do I prep my property for sale?

How do I prep my apartment for sale in Sweden?

Choosing to sell your house or apartment is a big step – when is the best time to sell? What should the asking price be? How do I choose an estate agent?

You’ve done all that, so what’s next? It’s time to prepare yourself – and your apartment – for the upcoming move. But how do you make sure your apartment stands out?

Your estate agent will want to take photos of your apartment as soon as possible for property sites Hemnet and Booli, as well as their own website. However, this isn’t just a case of a photographer coming round to your apartment the next day – you will need to carefully style your apartment beyond recognition first.

Some estate agents offer a styling service as part of their fee (arvode). Some include it as an add-on, which can cost anywhere from 1,500 kronor to 5,000 depending on the estate agent. If you don’t fancy paying that amount, you may be able to get your estate agent to give you some tips on what to do, or you can do it yourself. Here’s a rough guide if you choose the latter route.

Light and airy

Swedes love light. Therefore, you want your apartment to look as light and airy as possible. Nothing on your kitchen or bathroom countertops is allowed to stay – apart from a small (expensive) bottle of hand soap.

The one exception to this rule appears to be if you have a colourful mixer – like a KitchenAid, or a bowl filled with a random selection of fruits and vegetables.

You should also, if possible, make sure photos of your property are taken in summertime (even if you’re not planning on selling for months). This is so your apartment is bright and sunny in photos, rather than dark and grey like the Swedish weather for most of the year.

If in doubt, get a plant. Photo: Janerik Henriksson/TT

If you get kvällssol (evening sun), try to time the photos so they’re taken at the same time. If possible, time your flat viewings for a sunny evening, too, to show off the opportunities your apartment offers.

Avoid anything which could give away the date at which pictures were taken, though. If a keen-eyed potential buyer looking at your flat in October spots that your calendar is from July in your photos, it will just make them suspicious as to why your flat has been on the market for so long.

If possible, you want to get rid of as much furniture as possible without the room feeling empty. If that means getting rid of your work-from-home setup to dedicate half of your living room to a large monstera plant until the flat is sold, so be it. (I may be speaking from personal experience here.)

Spots of colour

Swedes love neutral colours. Most apartments have white walls, wooden floors, and furniture in varying shades of grey, white, brown or black. However, too many neutral colours together looks boring, so you need to break up the neutral palette with pictures, blankets, pillows and plants in varying colours.

For some reason, no one is allowed to see your bedding. I presume this is seen as incredibly private to Swedes, who will do everything they can not to intrude on your personal space (which admittedly, is quite difficult when they are touring your house full of all your personal belongings and deciding whether it’s nice enough for them to buy).

Photo: Janerik Henriksson/TT

This means that you need to put a throw on your bed, which goes all the way down to the floor. While you’re at it, scatter some colourful cushions on your bed, too, as the throw is probably white, like your walls, and you don’t want it to look boring.

If you have plants, use them. Put them on your bedside table, your windowsills, even in your bathroom (yes, this also applies if your bathroom has no windows, meaning the plants would die if left there for too long – it’s just for photos and flat viewings). 

Assume people have no imagination

It may seem obvious to you that people will be able to imagine themselves living in your apartment, but this doesn’t mean it is. You need to make your flat feel luxurious, even if it seems borderline ridiculous that you would ever have nothing but a bowl of lemons and a perfectly-dishevelled dishtowel on your kitchen countertops.

Similarly, if you live in one of Sweden’s big cities and are lucky enough to have a balcony, you must decorate it with some sort of attractive blanket (in, you guessed it, a neutral colour), a bowl of berries, a bottle of champagne and two glasses. It doesn’t matter if you’ve never used your balcony for anything other than storing drinks in winter, people must be shown the opportunities your balcony can bring. Swedes love to spend time in the open air, so show them that this is possible.

In a similar vein, if you have a garden, it must contain a barbecue. Barbecuing is a favourite Swedish pastime in summer, so show prospective buyers that yes, they can also have the pleasure of barbecuing in the garden, if they buy your property.

Get rid of everything which suggests someone lives there

Okay, almost everything. Leave nothing but a pair of shoes and two jackets on your clothes rack in the hallway. People need to be shown that someone lives there, in a way which is generic enough that they can imagine living there themselves.

Remove everything from your bathroom which isn’t attached to the wall. Don’t even show prospective buyers that you use soap.

Take down any family photos or photos of people. Privacy-focussed Swedes don’t want to be rudely reminded of the fact that someone actually lives in this apartment they are considering purchasing.

Oil, vinegar, salt and pepper are only allowed in your kitchen if they are expensive brands which you have never opened and bought specifically for photos. Your desk must have nothing but a computer on it.

Books are no longer for reading, they’re for putting plants on top of. Photo: Janerik Henriksson/TT

Your books are no longer for reading, they are decorative items. This means removing the vast majority and instead displaying them in a few carefully-composed piles on your bookshelves, preferably colour-coordinated.

Your coffee table is nothing but a surface on which to display a lit candle and a bunch of flowers. 

The one exception to this rule is your kitchen table. Cover it with a tablecloth, set out a couple of attractive mugs or champagne glasses, a candle and a bunch of flowers to make it look like you regularly have romantic candlelit dates in your kitchen. Like I said, it needs to feel luxurious.

By the end of this process, the goal is to make you feel like you live in an IKEA catalogue.

There’s a bonus, too. By the time you’re finished, so many of your personal belongings will be hidden away in boxes that it will take you half the time to pack when it’s finally time for you to move house.

One final tip…

If you’re not sure how to style your apartment, have a look at what others have done. Look at estate agents’ websites, as well as Hemnet and Booli for inspiration.

And if you want some ideas on what not to do, have a look at Instagram account @hemnetknarkarna for a collection of some of Sweden’s weirdest property ads.

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