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	With prices holding fi rm, could Sweden prove to be a safe haven for property investors?
By Shane Mcginley

Sweden is somewhat of an anomaly in the property world. It’s the third-largest country in Europe, yet is only home to 9 million people. While this gives it an average population density of 20 people per km², nearly 85% of Swedes are crammed into the urban areas, which are mainly in the south.

The capital Stockholm is the 13th most expensive city in Europe, but properties can still be picked up relatively cheaply. The Global Property Guide shows that, while average prices per m² are €19,094 in the UK, €10,014 in France and €7,054 in Italy, Sweden is way down the list on €3,167, even below so-called developing markets like Romania, Lithuania and Poland.

While interest rates are rising and Sweden has a heavily regulated rental market, the property market continues to be one of the best performing. In the Knight Frank Global House Price Index, it jumped from 31st last year to ninth this year. Like its famously beautiful inhabitants, Sweden is indeed an intriguing market for analysts. For investors in the commercial property sector, it has always attracted foreign interest. Even though the economy has slowed down, due to tougher global conditions, the Invest in Sweden agency points out that foreign investment has increased fi ve-fold in just fi ve years.

Similarly, agent CB Richard Ellis reports that last year Stockholm had the fourth-highest commercial property investment turnover in Europe, behind London, Paris and Frankfurt. “Relative to other markets, Sweden’s economy is holding up extremely well,” says Fredrik Lidjan, head of investment strategy at DTZ Sweden, who ranks Stockholm and Gothenburg as two of Europe’s 10 best markets..

But, for everyday residential buyers who want to snap up a piece of property to rent out, it is not so simple. The rental market is seen as a way of offering tenants a roof, rather than for landlords to rake in profi t. So rents are unnaturally low and properties scarce, despite the fact that Swedes generally like to rent.

“There have been discussions about changing the regulation, to have ‘market-based’ rents instead,” says Johan Vesterberg from agency Fastighetsbyrån. A recent report suggested that the government should loosen up these regulations, but nothing has happened yet.

The Swedish Union of Tenants (SUT) is a powerful organisation, and of the approximately 1.6 million rental properties in Sweden about 860,000 are owned by housing companies that do not operate for profi t, while the remainder are owned by private landlords and companies that must negotiate with them on rent increases. SUT has seen that on average rents have only increased by about 1%–3% a year. In Stockholm there is a serious shortage of rental properties, and the tough regulations have led to black market in highly-priced, illegally-let properties.

Statistics Sweden has found that while average lending rates rose from 4.58% last year to 5.5% this year – and prices have been good, albeit lower than in previous years – the country is full of “krona millionaires”, as a fi fth of Swedes aged over 20 have assets in excess of 1 million kronor (€106,114). The majority of this wealth comes from property, so Swedes must be delighted for the turnaround in the market’s overall fortunes. In late 2007 and early 2008, negative growth was observed, but prices are now back on track. This has been viewed as a seasonal adjustment by most analysts.

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