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PROPERTY

Why are one fifth of Swedish properties selling for below asking price?

Across Sweden, almost one in five properties sold below asking price in the first two weeks of June - almost as many as in summer 2020, just months after the outbreak of the Covid-19 pandemic.

Why are one fifth of Swedish properties selling for below asking price?
The new figures come from Swedish property site Hemnet. Photo: Fredrik Sandberg/Scanpix/TT

The downturn on the property market in Sweden is perhaps becoming more and more clear, with one in five properties selling under asking price in the beginning of June.

Rising interest rates from the Swedish central bank alongside high inflation is starting to make its mark on apartment and house sales. It’s not just affecting prices, but also leading to a larger number of sellers having to sell for lower than asking price.

Across Sweden, the percentage of sellers selling under asking price in the first two weeks of June amounted to 19.2 percent, according to statistics from property site Hemnet. This is almost as many as in summer 2020 (20.6 percent), when the market was affected by uncertainty over the Covid-19 pandemic.

“It’s a clear change,” Erik Holmberg, analyst at Hemnet, told TT newswire.

“The main factor is a market which is changing, and if we compare this to a year ago it’s a significant difference, where it’s become a buyer’s market.”

Record-high asking prices

Holmberg also said that in this type of situation, many who are looking to sell their home adopt a different strategy.

“We’ve seen record-high asking prices. Historically, it’s been the case that when the market becomes more cautious, there’s a tendency to put property on the market at a high asking price,” he said.

There are also clear regional differences. In inner-city Stockholm, where some of Sweden’s most expensive apartments per square metre are located, prices have dropped by almost exactly a fifth (20.1 percent). Last year prices in this area dropped by 4.7 percent, with a 12 percent drop in 2020 and a 9.9 percent drop in 2019.

Jakob Jakobssen, an estate agent at Widerlöv Stockholm, has almost 14 years’ experience in the property branch. He agreed that the situation has changed noticeably over the last six weeks.

“In general, I can say that buyers are more cautious and careful,” he told TT. “There’s a very low interest in advance viewings and very few properties are sold before viewing. Buyers want a more traditional viewing.”

Hard to match buyers with sellers

Another deciding factor is the fact that supply has increased drastically from the lower level seen around the beginning of the year until March. Now, the challenge is matching up buyers and sellers with each other.

“I’ve been an estate agent for a long time and been through downturns, like in autumn 2008 and in 2017, so I think I have the right tools to help buyers and sellers feel secure, but there are lots of newer colleagues in this branch who are having a hard time,” Jakobssen said.

“Maybe they started working when the market was on the up and they’re struggling to understand the situation the market is in right now.”

During the Covid-19 pandemic, different kinds of properties were affected in different ways, with larger apartments selling better than smaller ones. However, this time it’s affecting all properties equally.

“With the effects we have now such as rising index rates, rising inflation and drops on the stock market, it’s affecting all kinds of apartments, whereas during the pandemic, it was affecting different types of apartment in different ways,” he said.

“This is hitting the whole property market hard.”

However, Jakobssen believes the situation will be different after the summer.

“I think there’ll be more sales in August-September than there are now, but at a lower level. Sellers will have learnt by then that there’s been an effect on the market.”

 

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ECONOMY

EXPLAINED: What can foreigners in Sweden do about the weak krona?

The Swedish Krona last week hit a record low against the dollar, hammering the international buying power of anyone earning their salaries or holding assets in the currency. We asked Johan Löf at Handelsbanken what they can do.

EXPLAINED: What can foreigners in Sweden do about the weak krona?

How low is the krona right now? 

On Tuesday, September 27th, the krona to dollar exchange rate hit an all-time-low of 11.37, easily beating the previous record low for the currency of 11.04, which it reached at the nadir of the dot com bust back in 2001. At the time of the financial crisis in 2008, a dollar would have got you less than 6 kronor, meaning the currency has almost halved in value in less than 15 years. 

A euro now gets you 10.9 kronor, which is not quite a record, with it briefly topping 11.4 in 2009, but more than it has been for most of the past decade. 

The only major currency which is more or less stable against the krona is the pound, which will now buy about 12.39 kronor, down from 13 in February, but above the levels of around 10.5 the pound hit shortly after the UK voted to leave the European Union. 

Why is the krona worth so little? 

Johan Löf, the head of forecasting at the Handelsbanken bank, told The Local, that the krona always tended to take a hit at times of financial uncertainty. 

“The krona is a relatively small currency much like the Swedish economy is a relatively small economy,” he said. “You could compare it to a small boat sailing the big ocean, so when you don’t go on the course that you thought you were going, it can be a bit of a shaky ride,” he said.

“Right now with financial market conditions being volatile, with a lot of uncertainty and risks, the Swedish krona takes a hit. Investors and various agents of the economy don’t want to hold so much of this smaller currency. Instead, they they go to safe havens like the US dollar.

“So even though there are fundamentals that would suggest that the Swedish kroner will strengthen again over time, for the time being and for some foreseeable future, we think that the krona will remain quite weak.”

How are foreigners living in Sweden affected? 

It very much depends on their individual financial situation: which currency they earn their salary in, which currency they hold assets in, and which currencies they have the highest outgoings in. 

People who live and earn in Sweden, but travel regularly to countries with stronger currencies, or perhaps send remittances back to family at home, are likely be negatively affected, Löf said. 

“It makes you lose purchasing power in these other countries: you get fewer goods and less services for the money that you have in the Swedish currency.”

It’s a similar situation for people or small businesses based in Sweden, who need to, or perhaps only want to, buy goods outside of Sweden. 

On the other hand, for people who have substantial savings abroad in dollars or euros, this might be an opportunity to convert them into kronor for use in Sweden.  

“If you have savings abroad, and you feel the need to use some of those savings, when you then sell your foreign currency to buy Swedish kronor, then you will get more Swedish kronor,” Löf explained. 

What can foreigners living in Sweden do to lessen the impact of a weak krona? 

Change the currency in which you get paid 

The best way to protect against currency exchange shocks is to make sure that you’re paid in the same currency that you spend in, so if you live in Sweden but have a lot of your outgoings abroad, it’s an advantage to be paid in dollars or euros. 

If you’re considering getting a new job, perhaps favour international employers that can pay you in one of the major currencies, or if you work for a big international company, perhaps you can ask to be paid in a different currency. 

Get freelance or part-time work outside of Sweden

If you work as a freelancer, or have some spare time for additional work, consider getting part-time freelance gigs with companies abroad that pay in euros or dollars. The lower the krona sinks, the higher your real wage when you spend in Sweden. 

Time major spending for the best point in the market 

If you have savings in kronor and are considering, for instance, buying a holiday house abroad, it is probably worth waiting until the kronor has strengthened and the Swedish economy is back growing strongly. 

Similarly, if you have savings outside of Sweden in euros or in dollars, and have been planning on buying a property in Sweden, now might be a good time to consider doing so (although it may be worth waiting a few months until interest rate rises have been fully reflected in reduced Swedish property prices).

Get a multiple currency account 

It can be helpful to have an account in multiple currencies, such as those provided by banks such as Wise and Revolut. Keeping any cash in a combination of dollars, euros and kronor can reduce your exposure to any single currency. 

The advantage for foreigners living in Sweden is that you can set up US dollar, Euro and Pound accounts, each with their own local bank number, which you can use to receive and make payments domestically in each country. 

With the krona so low right now, it may not be a good idea to convert all your assets from krona to euros or dollars right now, as the currency is probably more likely to strengthen than weaken over the coming year.

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