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Swedish apartment prices continue to fall

Flat prices fell by 4 percent in Sweden in June compared to the previous month, according to fresh figures from Sweden’s real estate statistics website Mäklarstatistik. This marks the third month in a row that flat prices have fallen in Sweden. However, house prices still remain unchanged.

Published: 14 July 2011 10:58 CEST

Swedish apartment prices continue to fall

But according to Peter Pütsep, CEO of real estate agents Svensk Fastighetsförmedling, it is too early to tell if this is a season-based drop or a lasting trend of the market.

“It is a drop, but we tend to be careful when we are talking about a single month during the summer. We’ll see in a month or so where we are heading,” he said to news agency TT.

The drop seems to have affected Malmö, in the south, worst, with flat prices down 9 percent between May and June.

But according to Pütsep this is normal, with fluctuations more violent there than in larger cities like Gothenburg or Stockholm, partly because there are less flats but also because newly built properties can affect the market prices.

In central Stockholm and central Gothenburg prices fell by 2 percent in the same period.

How the market will develop in the near future is hard to predict, according to Pütsep.

Many factors could affect prices, including the rising interest rates, the mortgage cap and the financial development. There are also growing clouds on the horizon in the shape of the mounting debt in Europe and the US.

When the market seems unstable many customers tend to wait and see what happens, and according to Pütsep realtors across the country have noticed that it takes longer to sell than previous months.

The number of flats sold during the second quarter of 2011 was 17,156, approximately 1,100 less than the same periods last year. 11,241 detached houses were sold in the same time, a rise by 600 compared to last year.

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Why buying property in Austria remains unaffordable for most

Many people living in Austria dream of one day owning a home, but despite recent drops in property prices and interest rates, this dream is still out of reach for many average earners.

In Austria, it is recommended to not spend more than 40 percent of a monthly income on debt repayment.

But new analysis by tariff comparison portal durchblicker.at reveals that even a double-income household would need to spend around 60 percent of their income to afford a 90m² new-build apartment in Vienna.

While the government has created initiatives to improve the affordability, with attractive housing packages, fee reductions and eliminations of certain fees, such as the “Grundbucheintragsgebühr” (land register entry fee) and “Pfandrechtseintragungsgebühr” (mortgage registration fee) for properties up to a certain value, their impact has been limited.

Furthermore, the governments initiatives often overlook the specific needs of lower-income households and may benefit those who are already financially stable, leaving the average earner still struggling to afford a home, according to Der Standard.

READ ALSO: ‘Haushaltsversicherung’ – How does Austria’s home insurance work?

High prices, rates and strict lending criteria

One of the biggest barriers to owning a home in Austria is simply the sky-high property prices. Over the years, property prices have increased, making it more difficult for people with an average income to afford a place of their own. Even with recent minor dips in prices, they still remain high.

Another factor making owning a home challenging is the increase in interest rates in recent years. As a result, both existing variable-rate loans and newly obtained fixed-rate loans have become more expensive. Analysts expect the European Central Bank to cut interest rates by around 0.5 percent in the near future, but according to durchblicker’s calculations, this would initially only create a little relief for loan takers, where instead of around 60 percent, 55 percent of monthly household net income would be needed for debt repayment.

Another issue preventing many from realising their dream to buy a home is the difficulty in obtaining a mortgage. Since July 2022, stricter rules have applied in Austria for the granting of property loans. Loan applicants must have a deposit worth at least 20 percent of the value of their property to be granted a loan, according to the financial online platform Finanz.at. This means that even applicants with higher incomes may struggle to get their dream financed.

Furthermore, many loan takers with variable-rate loans, especially those recently obtained, are facing significant challenges. The variable interest rates have increased significantly since the initiation of these loans, resulting in higher monthly repayments, reported Der Standard.

Few people can afford their own home in Austria, especially in Vienna. Photo by Christian Lendl on Unsplash

Experts suggests fixed rate loans and cooperative housing models

Andreas Ederer, Head of Banking at durchblicker.at, recommends loan takers with variable-rate loans to change to fixed-rate loans. He suggests that fixed-rate loans have become more attractive as they are currently cheaper than variable-rate loans, reported Kurier.

Unlike fixed-rate loans, which have a steady interest rate throughout the loan term, variable-rate loans can change over time in response to shifts in market conditions or the economy.

Experts also suggest alternative models for increasing affordability. One idea is to create more opportunities for cooperative ownership with mandatory purchase options. This could offer a more affordable option where costs such as maintenance and taxes are shared. According to Der Standard, cooperatives also often have access to loans with better terms.

READ NEXT: How can I move into affordable cooperative housing in Vienna?

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