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Housing market ‘overheating’ in big cities

The demand for housing in Sweden's big three cities, Stockholm, Gothenburg and Malmö, has pushed the market to the verge of overheating with prices set to rise by 15 percent in 2013 according to a new report.

Published: 18 October 2013 14:02 CEST

Housing market 'overheating' in big cities

“Brokers are usually quite reliable and expectations are that a new price record will be reached by the end of the year with a price increase for the whole of 2013 to be around 10 – 15 percent. A somewhat stunning development considering the recession,” Tor Borg, chief economist with Swedish housing lender SBAB, said in a statement.

The SBAB report revealed that the demand for houses and apartments in Stockholm in particular was much stronger than expected which took the market by surprise. Both Gothenburg and Malmö also experienced a heated up market which brokers believe is likely to continue.

Despite the system of an accepted price in place there was a significant difference between the starting and final sale price for three consecutive quarters according to the report.

However, the analysts said that the increasing rates were “unsustainable” in the long-term.

“Housing prices increasing by 10 percent per year is unsustainable. It is to be hoped that probably there will be a slowdown ahead when we go down to reasonable growth rates,” said Borg.

Prices are expected to rise again in the fourth quarter based on the forecast by SBAB. Apartment prices in Stockholm will go up by a further 3 percent in Stockholm, 2 percent in Gothenburg and 1 percent in Malmö.

Tor Borg said that the figures masked another problem, namely that the cost of housing was affecting the larger economy.

“One of the biggest problems is the shortage of housing. Many times people cannot take a job in a big city as they have nowhere to live or they can’t afford it. In the long run there is a risk that this affects the growth of the whole economy.”

The broker barometer carried out by SBAB bank was based on surveys done with more than 200 estate agents in the major cities.

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How to buy your own Swedish island

How can I find an island for sale?

Perhaps surprisingly, you can find islands for sale in the same places you find other properties in Sweden, for example on property site Hemnet, or directly through an estate agent.

As you may expect, people who own their own islands often want to hang onto them, so they don’t come up for sale very often.

If you’re still interested in finding your dream island, then try searching egen ö till salu (own island for sale), and be prepared that you’ll probably have to wait a while before one comes up in your ideal area.

You might also get lucky and be able to find a property which just happens to include a small island with it (for example, a property by a lake or by the sea), but there’s no guarantee that the island would be big enough to actually do anything with – and if it is, the price of the property would no doubt reflect this.

Can I build on it?

Islands usually fall into two categories: those where there is already some sort of house or building (like a lighthouse, for example), and those which are completely untouched.

Bear in mind that the rules on building on islands are pretty strict. Firstly, you’ll need to apply for planning permission (yes, even if you own the whole island), which can be difficult.

Essentially, all Swedish coastlines are protected under strandskyddet (literally: “beach protection”), which means that they must be accessible to the public and cannot be built on or fenced off for private use. The exact area which must be protected varies, but as a general rule you’ll have to keep the shoreline accessible 100 metres inland – going up to 300 metres in some cases.

Under allemansrätten, the right to roam, members of the public must be able to access the coastline, so even if you have your own island which you build your own jetty on, you can’t stop people from turning up and mooring at your jetty to lounge on the rocks.

The only exception to this is if they’re so close to your home they disturb your hemfrid, literally “home peace”, for example if they’d be able to see into your property or would feasibly intrude on your private life.

The downside to this hemfrid rule is that it can sometimes get in the way of planning permission – if a rebuild or extension to your home would extend your hemfrid so much that it would encroach on the public right to access the coastline (even if it’s something as simple as putting in larger windows or building a small veranda), then your application could be rejected.

So essentially, you might need to forget about your dreams of a supervillain-style lair on your own private island.

How much does it cost?

Island prices vary wildly, depending on things like the size of your island, how close it is to a major city, and whether it has buildings or pre-approved planning permission.

Expect to pay a couple million kronor for a larger island (like this one) close to Stockholm or Gothenburg (yes, even if you can’t build anything on it).

Lilla Kattskäret, an island in Norrtälje around an hour from Stockholm with a handful of small buildings and two separate jetties, sold in August for just under 10 million kronor.

If you’re right in the middle of the city centre, you might see islands listed with no price at all, like this island complete with summer house, guest house and another, smaller island. A stone’s throw from Drottningholm Palace – the home of the Swedish King and Queen – this might be a case of “if you have to ask how much it costs, you probably can’t afford it”.

And don’t forget – you’ll need your own boat to access it, too.

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