Sweden: Overview

RENTAL YIELDS

Last Updated: Sep 09, 2005

Yields are low to moderate

Swedish property yields are low to moderate according to Global Property Guide estimates (alas, our yields data has not been updated since September 2005). Mid-sized apartments (80 to 120 sq. m.) have yields at 6 to 7% while other sized properties have yields of around 3 to 4%.

Apartments in the second-largest city of Göteborg have yields of around 5% to 7%, while properties in suburban Stockholm have relatively lower yields, at 3% to 5%. Because rents are tied to the age of the property, the higher yields in the city-center reflect newer housing stock in those areas.

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TAXES AND COSTS

Last Updated: Aug 13, 2008

High rental income taxes and CGT

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	22.8%	28.2%	28%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Non-resident landlords are taxable on rental income accruing in Sweden at a flat rate of 30%.

Capital Gains: Capital gains tax is levied at a general rate of 30%.

Inheritance: Inheritance tax in Sweden has been abolished since January 2005.

Residents: Residents are allowed certain allowances and deductions from their worldwide taxable income.

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BUYING GUIDE

Last Updated: Mar 29, 2007

Transaction costs in Sweden are low

Closing costs range from 4.5% to 7.5%. The buyer pays stamp duty (1.5%) and registration fee of SEK825 (€88.50). The seller pays the real estate agent’s fee (3% - 5%). When the buyer and the seller reach an agreement, the former pays a deposit ranging from 2% to 10% of the purchase price.

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LANDLORD AND TENANT

Last Updated: Nov 15, 2006

Strictly regulated rental market

Sweden’s rental market is strongly pro-tenant. The system is enormously counter-productive. Eight per cent of the Swedish population is queueing for a new apartment, with an average waiting time of 10 years

Rents: Rents are set far below reasonable returns-on-investment. Rents are little influenced by location, so that metropolitan units are especially under priced. The system is enforced by Rent Tribunals.

Tenant Security: Tenants have a right to prolong their contract, essentially for ever. The rule is totally asymmetric; a tenant may at all times give 3 month’s notice, even if the contract is fixed for a given period, to terminate the agreement.

In September 2006 the Alliance for Sweden, a centre-right coalition headed by Moderate Party leader Fredrik Reinfeldt, unseated the Social Democrat Party of Goran Persson. Since then, the housing system has been high on the agenda. An ongoing state review of the system argues for the removal of the current rental ceiling, so that private housing companies and individuals could set market rents.

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ECONOMIC GROWTH

Last Updated: Aug 27, 2008

Testing the Swedish model

Sweden is one of the world’s most highly developed post-industrial countries with GDP per capita of US$36,900. Sweden has a population of 9.18 million occupying a land area (450,000 sq. km) about the size of Germany.

The secret of its prosperity is probably the so-called "Swedish model" - a mixed economy founded on public-private partnership. Its main features are a centralized wage negotiation and a heavily tax-subsidized social security network.

Sweden has been a member of the EU since 1995, but decided against adopting the single currency (the Euro) in September 2003.

The country recovered gradually after an economic crisis hit the country in the early 1990s with the economy contracting by an average of 1.2% from 1991 to 1993. The economy then grew by around 3.9% in 1994 and 1995 and by an average of 3% from 1996 to 2006. GDW growth rate in 2007 was 2.6%.

Real private sector wages rose by an average of 4% from 1996 to 2007. Unemployment dropped from 8% in 1996-97 to 4% in 2000-01 before rising to 5.8% in 2005. In 2007, it was down to 5.3%.

The country’s gross domestic product (GDP) was unchanged in Q2 2008 from the previous quarter, although still up 1% from the same quarter in 2007. The economy is expected to grow by around 2% in 2008, down from 2.8% in 2007.

Inflation in Sweden has been one of the lowest among European countries since the mid-1990s. With rising global fuel and food prices, inflation was 4.36% in July 2008. This was the highest rate since 1993 and way beyond the Riksbank’s 2% inflation target.

With lower economic growth and softening of house prices, inflation is expected to ease to an average of 3.0% for 2008.