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PROPERTY

Buyer’s market: a step-by-step guide to bidding on an apartment in Sweden

It's now a buyer's market for property in Sweden, with one fifth of sales taking place below the offer price in the first two weeks of June. In Sweden the apartment-buying process often moves fast and has fewer additional fees than in many countries. We've outlined the steps you need to take and the pitfalls to look out for in this guide for potential buyers.

Buyer's market: a step-by-step guide to bidding on an apartment in Sweden
How to get your dream Swedish apartment in six steps. Photo: Photo: Fredrik Sandberg/TT

Buying a property abroad can be daunting, but in Sweden the apartment-buying process often moves fast and has fewer additional fees than in many countries, meaning it can be an appealing option compared to the precarious rental market. Here are some things to know before you step in and buy. 

1. Decide if buying is right for you and set your budget

Historically, buying property has been a good investment in Sweden but with interest rates on the rise and property prices falling in recent months, this may not be the case over the next few years. 

Whether or not you should buy depends on a range of factors including how long you expect to stay in Sweden, whether or not you have access to a stable first-hand rental contract, your budget, and of course your personal preference.

New arrivals may find it harder to buy; although there are no rules stopping non-residents from buying, it can be hard to get a mortgage without a history of income in Sweden. We’ve outlined the pros and cons in detail in the following article:

If you decide buying is the route for you, you’ll want to begin researching properties available in your preferred area to decide on your budget and which features are must-haves. 

2. Get a loan promise

Once you know how much the properties you are interested in cost and how much you think you can afford, it’s time to talk to the bank. 

A loan promise (lånelöfte) isn’t a necessity when you attend viewings, but because the market tends to move fast it is generally a good idea to speak to your bank before you start the process. Make sure to shop around and speak to different banks, as some may offer better deals, although you don’t have to take out a mortgage with the one that gives you a loan promise.

When you buy a house in Sweden, you’ll usually need to pay a minimum of 15 percent of the total price as a deposit (kontantinsats), so the remaining amount will be covered by the mortgage. You’ll pay back a certain amount each month over a fixed length of time, often 25 or 50 years. If your deposit is less than 15 percent, then your mortgage will be split into two different loans, including one that covers the cost up to 15 percent of the total price which will typically have a higher interest rate and a shorter term. 

Find out more about how the system works and how to choose your mortgage wisely in this article:

3. Go to viewings

Now the fun part begins as you can start your search in earnest. Most apartments in Sweden are advertised on property site Hemnet, but you can also speak directly to estate agents. Researching as early as possible will help you get a feel for typical prices per square metre, and what type of place and location you can afford.

On Hemnet you can refine your search to show properties which have been on the market a long time, which may help identify sellers who can be persuaded to sell below the list price.  

Once you have found a few places that pique your interest, it’s time to start going to viewings. Usually these take place on Sunday afternoons and Monday or Tuesday evenings, with two initial viewings per apartment, but this may vary. Viewings are often just 30 minutes long and as a buyer, you cannot later claim compensation for any flaws in the property that you could reasonably be expected to have identified at the viewing, so use the time wisely. You should be on the lookout for things like damp, mould or pests, but also whether the layout suits your lifestyle and whether any renovations are needed. The more viewings you go to, the more you will get a feel for exactly what you want from your Swedish home.

A tip: it’s sometimes possible to skip the bidding process (see step 7) if you can arrange a pre-viewing and put in the right offer before anyone else is given a chance to see the apartment. You can do this either by contacting estate agents directly and sharing your requirements (many agents will advertise apartments before they go on the market described as kommande försäljningar or “upcoming sales”), or by acting fast and asking for an early showing as soon as an apartment you like is published on Hemnet (usually Fridays).

People viewing an apartment in Sweden. Photo: Janerik Henriksson/TT

4. Analyse the association’s finances

Doing your homework on the housing association (bostadsrättsföreningen) and its finances and making sure they are in good shape is at least as important as a careful viewing of the actual apartment, possibly even more so. You can find most of the information you need in its annual reports (årsredovisningar), which will usually be available online as well as in paper copies at the viewings.

Key things to look for include the level of debts the association has; any planned renovations and how much money has been set aside to pay for them; income sources; and how vulnerable the association would be to future changes in the interest rate. These figures can seem intimidating, especially in a second language, but we have explained how to make these calculations in the article below:

5. Start bidding

When you know you want to bid on an apartment, let the estate agent know, and they will tell you when you can put in an offer. 

You might get lucky and be the only bidder, but in the larger cities it’s more common that there will be a bidding war, carried out over text. Once the first bid is made, everyone who’s expressed interest is notified of each following bid via a group text message, and they can raise the price by responding to the text with their own offer.

Bids aren’t legally binding, so you have a small window of time to change your mind or look into anything that’s worrying you without any liability, but once you’ve won a bidding war, it will usually only be a day or two before you need to sign contracts.

In Sweden, bidding is usually done by text message. Photo: Tomas Oneborg/SvD/TT

6. Write the contract

Once all bidders but one have dropped out, the winner is invited to sign contracts, and this often takes place the very same day. 

This is when you commit to buying the apartment, signing a transfer of ownership agreement (överlåtelseavtal) and agreeing to pay the agreed amount, usually beginning with a ten percent deposit (handpenning) within one week. Until this agreement is signed, it’s possible for someone else to outbid you by putting in a new offer, and it’s also possible for you to back out or even change your own offer. Once these agreements are signed, however, you cannot back out and would be liable to pay compensation if you do (typically this would cover the cost of putting the property back on the market, plus any difference in price between what you agree to pay and what the property eventually sells for). 

The överlåtelseavtal will be conditional on your acceptance into the bostadsrättsföreningen. Once that happens, you (and your bank, assuming you have a mortgage) pay the rest of the money for the purchase and take over ownership of the apartment on the move-in date (tillträdesdag) agreed with the seller.

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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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