Sweden’s house prices soaring!

Lalaine C. Delmendo | October 04, 2022

Sweden’s national house price index surged 16.7% (14.4% inflation-adjusted) during 2021.  This is a sharp acceleration from y-o-y rises of 6.6% in 2020 and 2.7% in 2019, according to Statistics Sweden, as the impact of stricter mortgage requirements waned and economic activity gradually returned to pre-pandemic levels. It was the country’s biggest house price growth since 1989.

“One explanation for the price increases among single-family homes is the changes in demand that occurred during the pandemic, for example the need of more living space because of increased working from home and the sharp drop in travelling abroad,” said the Swedish Bankers’ Association.

Source: Statistics Sweden

Another reason is low interest rates. In February 2022, the Riksbank held its policy rate unchanged at zero, following a quarter point rate hike in December 2019 that effectively ended five years of negative interest rates. It is one of the lowest benchmark interest rates in the world.

By region:

  • Greater Stockholm house price index rose by 18.6% y-o-y in 2021 (16.3% inflation-adjusted), a sharp improvement from the annual increases of 6.3% in 2020 and 0.5% in 2019, based on figures from the Statistics Sweden. It was the highest growth seen in the region since 2000.
  • Greater Göteborg house prices soared 15.7% during 2021 (13.4% inflation-adjusted), following y-o-y increases of 5.1% in 2020 and 3.1% in 2019. It was the region’s best showing in 32 years.
  • Greater Malmo house prices surged 18.6% during 2021 (16.3% inflation-adjusted), a sharp acceleration from y-o-y rises of 8.1% in 2020 and 4.3% in 2019 and its biggest growth since 1989 when prices rose by 24.2%.

“After the outbreak of the pandemic in 2020, there was considerable uncertainty on the housing market. Following the introduction of measures by the authorities to reduce the effects of the pandemic, this uncertainty decreased and was instead replaced by significant price increases, in particular among single-family homes,” the Swedish Bankers’ Association noted.

“The housing and construction market was more resilient than many observers had expected, and demand for single-family homes and larger apartments increased instead during the pandemic with many people working from home,” the Swedish Bankers’ Association added.

Sweden average house prices

Sweden’s housing market is expected to remain buoyant this year. “JLL continues to observe a robust market and predicts that transaction activity will remain high in 2022, supported by good access to capital and favourable credit terms,” said JLL.

Sweden’s economy grew by about 4.9% during 2021, fully offsetting the 2.9% contraction in 2020, according to the Ministry of Finance, thanks to higher inventory investments, increasing exports and household consumption. The country’s GDP is now at a higher level than before the Covid-19 pandemic.

During Sweden’s recent housing boom (2012-2021) house prices surged by almost 90% (70.8% inflation-adjusted). Over the past two decades house prices have risen by a whopping 260% (178% inflation-adjusted).

Yet recently the Ministry of Finance downgraded its 2022 growth forecast to 3.1%, 0.3 percentage points lower then earlier projections, due to the Ukraine crisis. The European Commission and the IMF are more optimistic, with growth forecasts for Sweden at 3.8% and 3.4%, respectively.

Swedish house prices are worryingly high

Stockholm entered the bubble risk zone again in 2021, according to the 2021 UBS Global Real Estate Bubble Index. Stockholm is one three cities in the world with the highest increase of imbalances in 2021, compared to the previous year.  “In no other European city evaluated have imbalances increased so fast since mid-2020,” said UBS.  Stockholm is also among the cities with the highest price-to-rent ratios.

“More than two straight decades of rising property prices ended in 2017 as affordability decreased and tighter mortgage standards were introduced. By 2019, real prices had corrected by 10%,” noted UBS.  “But the pandemic and falling mortgage rates have now sparked a downright housing frenzy.

Earlier, the International Monetary Fund (IMF) had already voiced its concern: “House prices have tripled in real terms since the mid-1990s, lifting the price-to-income (PTI) ratio to almost 30 percent above its 20-year average, with Stockholm’s PTI nearly twice the national average and among the highest worldwide.”

Sweden gdp house prices

The loan-to-net income ratio increased to 411% last year from 398% in the prior year – the highest level since the Swedish Financial Services Authority (Finansinspektionen) started the mortgage survey.

“Consequently, stricter mortgage amortization standards have been reintroduced as macroprudential measures. But financing conditions continue to favor home ownership, especially in light of the highly regulated and (consequently) undersupplied rental market,” added UBS.

History of the Swedish house-price boom

Sweden’s present house price boom started in mid-1990s. The boom was set off by low interest rates, rapid economic growth and lack of new supply. Mortgage interest rates fell from 10%+ in 1996, to less than 5% between 2004 and 2008.

From 1996 to 2007, the Greater Stockholm house price index soared 217% (119% inflation-adjusted), while Greater Malmo rose 236% (185% inflation-adjusted), and Greater Gothenburg rose 202% (156% inflation-adjusted).

There was a pause in 2008 and 2012. But house prices soared again by 45.1% from 2012 to 2017 (40.7% inflation-adjusted). And, after falling marginally in 2018, there was house price growth of 3.9% (2.1% inflation-adjusted) in 2019, 6.6% in 2020 and by another 16.7% in 2021.

The government has tried - but failed - to cool the housing market

Riksbank cooling measures have rapidly succeeded each other, with little impact. From June 2016, mortgage loans of over 50% of the value of the property have had to be amortized (i.e, paid back) at 1% every year, while loans worth 70%+ of the property’s value must be amortized at 2% annually.

From March 2018 any new housing loan borrowers with housing debts exceeding 4.5 times gross income have been required to amortize at least 1% in addition to the fundamental amortization requirements.

Sweden  house price change areas

In addition, the Swedish Financial Services Authority has introduced a 25% mortgage risk weighting to tie up bank capital, thus discouraging mortgage lending.

Yet these measures had a trivial effect on the housing market, with house prices rising again after a small decline in 2018.

In April 2020 the Finansinspektionen introduced a temporary exemption from amortization payments amidst the COVID-19 pandemic – benefitting around 230,000 households. However, even after the temporary exemption expired on August 31, 2021.

“Demand has risen as a result of several factors, such as relatively favourable economic growth in Sweden, increasing household incomes, low interest rates, good access to credit, changed tax rules, a growing population and rapid urbanisation,” said the Swedish Bankers’ Association. “On the supply side, the limited housing construction relative to population growth, especially in urban areas, has been a fundamental reason for the rise in prices.”

Local house price variations

Of the eight Riksområden (National Areas), RIKS2 Eastern Central Sweden registered the biggest y-o-y price increase of 16.9% (14.5% inflation-adjusted) during 2021, followed by RIKS7 Central Norrland (16.1%), RIKS4 South Sweden (15.6%), RIKS6 Northern Central Sweden (15.5%) and RIKS5 West Sweden (15.1%).


Average house prices y-o-y change (%)
National Areas SEK EUR Nominal Real
RIKS1 Stockholm production county 6,927,000 673,286 14.7 12.4
RIKS2 Eastern Central Sweden 3,333,000 323,959 16.9 14.5
RIKS3 Småland with the islands 2,421,000 235,315 10.0 7.8
RIKS4 South Sweden 3,664,000 356,131 15.6 13.3
RIKS5 West Sweden 3,998,000 388,595 15.1 12.8
RIKS6 Northern Central Sweden 2,134,000 207,419 15.5 13.2
RIKS7 Central Norrland 1,972,000 191,673 16.1 13.8
RIKS8 Upper Norrland 2,259,000 219,569 12.8 10.6
Sources: Statistics Sweden, Global Property Guide

Nationwide house prices stood at an average of SEK 3,769,000 (€365,317) by end-2021, up by 13.6% from a year earlier.

Demand continues to rise

In 2021:

  • In Greater Stockholm, home sales rose strongly by 7.9% y-o-y to 9,637 units, up from the prior year’s 4.8% growth
  • In Greater Göteborg, home sales rose by 4.2% y-o-y to 4,840 units, up from the 1.5% increase in 2020
  • In Greater Malmo, home sales increased 4.4% y-o-y to 3,676 units, an improvement from the prior year’s miniscule growth of 0.6%

RIKS5 West Sweden, RIKS4 South Sweden and RIKS2 Eastern Central Sweden accounted for more than half of all sales in 2021.

Sweden home sales

“The Swedish transaction market recorded the second highest investment volume in Europe in 2021 and we remain confident that the transaction market in 2022 will continue to show a high level of activity and influx of new investors,” said JLL.

Foreign demand stable

Nationwide, there were 38,152 holiday homes with foreign owners in 2021, slightly up from the previous year, according to Statistics Sweden. Norwegians accounted from the largest share of 33%, followed by Germans (with 28% share) and Danes (with 26% share).

Yet there are wide regional variations in foreign ownership of holiday homes as a percentage of the total stock. Kronoberg County had the highest percentage of foreign ownership, at 38%, followed by Värmland, at 24%. In contrast, in Stockhol11m, Uppsala, Södermanland, Gotland and Västmanland counties, foreign ownership is just less than 1% of the stock.


County Total units Share (%)
Stockholm 234 0.3
Uppsala 56 0.3
Södermanland 114 0.6
Östergötland 393 1.7
Jönköping 1,868 13.7
Kronoberg 4,533 37.8
Kalmar 3,027 9.5
Gotland 85 0.7
Blekinge 1,484 11.1
Skåne 3,402 7.7
Halland 1,713 6.9
Västra Götaland 7,846 10.1
Värmland 6,549 24.0
Örebro 408 2.8
Västmanland 37 0.4
Dalama 1,118 2.5
Gävleborg 295 1.1
Västernorrland 506 2.0
Jämtland 1,976 6.1
Västerbotten 1,380 4.2
Norrbotten 1,128 3.8
Total 38,152 6.3
Source: Statistics Sweden

Residential construction activity mixed

Nationwide, dwelling starts in newly constructed one- to two-dwelling buildings rose by 11.8% y-o-y to 12,142 units in 2021 and increased by 10.7% to 48,717 units in multi-dwelling buildings, according to Statistics Sweden.

Sweden residential construction

In contrast, dwelling completions in newly constructed one- to two-dwelling buildings fell by a huge 22.3% y-o-y to 8,987 units last year and by another 10.5% to 34,811 units for multi-dwelling buildings.

By region:

  • In Greater Stockholm, dwelling starts in all newly constructed buildings rose by 8% to 15,178 units during 2021 while completions fell by 12.4% to 11,510 units.
  • In Greater Göteborg, dwelling starts in newly constructed buildings rose modestly by 2.7% y-o-y to 7,859 units in 2021, and completions increased 9.2% to 7,292 units.
  • In Greater Malmo, dwelling starts surged by 23.1% to 6,326 units during 2021 and completions increased 7.8% to 5,010 units.
  • In Sweden excluding metropolitan areas, dwelling starts rose by 12.4% to 31,496 units but completions plunged 23.2% to 19,986 units.

Rents continue to rise modestly

Over the past decade, rents have risen by about 20% - not far ahead of inflation, which was about 12%.

Rents for dwellings in Sweden rose by 2.4% y-o-y in 2021, to an average of SEK 6,663 (€646) per month, following growth of 2.9% in 2020, 3.4% in 2019, and 2.1% in both 2017 and 2018, according to Statistics Sweden.

Sweden dwelling rents

Swedish law requires that rent-setting be negotiated between tenant organizations and MHCs or private landlord organizations. Private rents are compared to social housing rents, which leads to rent conformity across tenures.

Interest rates remain very low

Mortgage interest rates remained very low. In February 2022, the average interest rate for housing loans stood at 1.48%, down from 1.57% a year earlier and 1.67% two years ago.

Sweden interest rates

“Monetary policy needs to provide continued support for inflation to be close to the target in the medium term,” said Riksbank. “The Executive Board has therefore decided to hold the repo rate at zero per cent and that the Riksbank shall purchase bonds for SEK 37 billion during the second quarter of 2022 to compensate for maturing assets in the portfolio.”

By maturity:

  • The average interest rate for housing loans with a maturity of up to 1 year stood at 1.5% in February 2022, down from 1.61% in February 2021 and 1.7% two years ago.
  • For loans with maturity of over 1 year and up to 5 years, the average interest rate fell to 1.43%, from 1.5% a year earlier and 1.59% two years ago.
  • For loans with maturity of over 5 years, the average interest rate fell to 1.93% in February 2022, down from 2.1% in the previous year and 2.36% two years ago.

Mortgage market said to be healthy, though it continues to surge

Record low borrowing costs have caused a surge in housing loans, which grew from just 28.6% of GDP in 2001 to 56.5% of GDP in 2010, and finally to more than 70% of GDP in 2021.

The Finansinspektionen noted that the continued rapid increase in mortgage lending in Sweden in the past two decades was mainly due to rising house prices, driven by stable income growth, a growing population, as well as historically low interest rates.

“Several factors explain the increasing residential lending. One important factor is the lack of housing,” said Christian Nilsson of Swedish Bankers’ Association. “The Swedish population is growing in record numbers due to high immigration and relatively high birth rates.”

“Another factor is the dysfunctional rental markets in the growth regions due to a general rent control, which results in many years of queuing to get a rental apartment on the first-hand market,” added Nilsson.

Sweden housing loans

Despite the continued increase in residential lending, the market remains healthy. “The Swedish market is characterised by a number of conditions that reduce the risk of more widespread problems on the mortgage market,” said the Swedish Bankers’ Association.

“One factor is that banks’ lending processes are stringent and governed by well-functioning legislation. Banks have long based their credit decisions on the borrower’s repayment capacity rather than the value of the collateral. There is also an efficient infrastructure, for example in the form of a property register and good access to credit information about borrowers. The welfare system is another significant factor, since households can maintain an acceptable financial position even in the event of unemployment or illness. The Swedish market is also characterised by very limited speculation. Most Swedes regard their homes primarily as a residence and not as an investment opportunity.”

During 2021, housing loans outstanding rose by 4.6% y-o-y to €379.5 billion, according to the European Central Bank (ECB). In the past 20 years housing lending to households has soared by more than 395%.

The three largest housing finance institutions in Sweden are owned by Swedbank (Swedbank Hypotek), Handelsbanken (Stadshypotek) and Nordea (Nordea Hypotek).

Swedish economy back at pre-pandemic level, inflation surging

Sweden’s economy grew by about 4.9% during 2021, fully offsetting the 2.9% contraction in 2020, according to the Ministry of Finance.

The country’s GDP is now at a higher level than before the Covid-19 pandemic.

Sweden gdp unemployment

“The recovery has been rapid compared with previous economic downturns and the Swedish economy has done well compared with many other countries in the EU,” said Finance Minister Mikael Damberg. “The fact that we entered the crisis with historically strong public finances has been crucial for the rapid recovery.”

Before the pandemic, the economy had been growing by an annual average of 1.9% from 2009 to 2019, according to the International Monetary Fund (IMF).

The Ministry of Finance downgraded recently its 2022 growth forecast to 3.1%, 0.3 percentage points lower than earlier projections, due to the Ukraine crisis. The European Commission and the IMF more optimistic, with growth forecasts for Sweden at 3.8% and 3.4%, respectively.

Inflation accelerated to 6% in March 2022, according to Statistics Sweden, sharply up from 1.7% in the previous year and already far above the Riksbank’s 2% inflation target. It was the highest level since 1991.

Unemployment stood at 7.9% in February 2022, down from 9.7% in the previous year, according to Statistics Sweden. Nationwide unemployment averaged 7.5% from 2009 to 2019 before rising to 8.3% in 2020 and to 8.9% in 2021.

Sweden exchange rate

The country’s public finances are improving again. In 2021, the general government finance deficit fell sharply to 0.2% of GDP, down from a shortfall of 2.7% of GDP in 2020. Yet it remains lower than the surpluses of 0.6% of GDP in 2019, 0.8% in 2018, 1.4% in 2017, and 1% in 2016.

As a percent of GDP, Sweden’s gross public debt dropped to 36.7% in 2021, from 39.6% in 2020. It is among the lowest in the European Union.



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