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HOMES

Report: Stockholm is at risk of a housing bubble

Stockholmers are the third most likely to experience a housing bubble in their city, according to a key ranking investigating a number of metropolises across the world.

Published: 28 September 2016 07:32 CEST
Report: Stockholm is at risk of a housing bubble
Apartments in Stockholm. Photo: Tomas Oneborg/SvD/TT

Swiss investment bank UBS said that the Swedish capital had the third most over-valued property market in the world, behind London in second place and Vancouver in first.

It examined 18 cities around the world and concluded that six of them were at risk of a housing bubble. Making up the rest of the top-six were Sydney, Munich and Hong Kong.

“Over the last 12 years, the real house price level in Stockholm has doubled. The pace of growth accelerated in the last two years as growth rates stood near 15 percent,” said the report, but noted that low interest on mortgages had stabilized the cost of owning a house in the same period.

It further added that property valuations had increased the most in Stockholm over the last four quarters, followed by Munich, London and Amsterdam.

The report said low-interest rates in Sweden and elsewhere had contributed to “overheating of markets for urban residential properties in recent years. As a result, prices in London, Stockholm, Munich and Zurich have reached new record levels after adjustment for inflation”.

Earlier this year, the Swedish founders of Spotify sparked debate after they suggested that a lack of available housing is making it difficult for them to attract the best talent, to the degree that they could be forced to grow in other countries rather than Sweden unless the situation improves.

While properties in many parts of Sweden are generally inexpensive compared to the rest of the world, The Local has previously reported on Stockholm's price boom, including the capital's acute housing shortage on the rental market, which is believed to be driving property prices upwards for buyers as well.

UBS criticized the city's divided rental market, which means that those without points in the local authority's queue for price-controlled apartments have to resort to the often vastly overpriced sub-letting market.

As for the buyers' market, the government has taken steps to bring prices down, including making it mandatory for home owners to pay off their mortgage, but the measures have so far had little effect.

“A dysfunctional rental market provides no incentives to counteract the long-lasting supply shortage. And recently enacted regulations to cool down the housing market have not shown any significant results yet,” concluded the report.

A bostadsrätt apartment (a type of housing ownership common in Sweden) in Stockholm currently costs 55,374 kronor ($6440) per square metre, compared to a national average of 37,118 kronor, according to real estate statistics agency Mäklarstatistik. A detached house in the capital area costs 42,199 per square metre, compared to a national average of 22,464 kronor.

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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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