Sweden Residential Real Estate Market Analysis 2023

The Swedish housing market is now cooling rapidly, amidst falling property demand and construction activity, coupled with a slowing economy.

Sweden’s house price annual change

During 2022, the national house price index fell by 3.33%, in stark contrast to y-o-y increases of 15.78% in 2021, 10.26% in 2020, and 3.9% in 2019, based on figures from Statistics Sweden. It was the country’s worst showing since 1993. In fact, when adjusted for inflation, house prices actually declined by a huge 13.35% last year.

Quarter-on-quarter, nationwide house prices dropped 5.65% (-8.52% inflation-adjusted) in Q4, the biggest quarterly decline in three decades.

Sweden average house prices

“The pandemic initially led to uncertainty in the housing market, although it quickly recovered. Strong demand, above all for single-family homes and larger apartments, led to significant price increases towards the end of 2020 and throughout 2021,” said the Swedish Bankers’ Association in its 2022 Mortgage Market report. “The increasing inflation and in particular the increasing mortgage interest rates during the spring of 2022 have resulted in the mortgage market starting to cool down and in housing prices starting to fall during the second quarter of 2022.”

By region:

  • Greater Stockholm house price index fell by 5% y-o-y in 2022 (-14.8% inflation-adjusted), a sharp turnaround from annual increases of 16.3% in 2021 and 11.9% in 2020, according to Statistics Sweden. It was the biggest fall seen in the region since 2018.
  • Greater Göteborg house prices declined by 4.5% during 2022 (-14.4% inflation-adjusted), following annual rises of 17.1% in 2021 and 6.2% in 2020. It was the region’s worst showing in 29 years.
  • Greater Malmo house prices fell by 5.3% during 2022 (-15.1% inflation-adjusted), in contrast to y-o-y increases of 18.1% in 2021 and 11.6% in 2020. It was the first annual decline in a decade.

Demand is now falling rapidly. During 2022, nationwide home sales declined by 8.7% y-o-y to 55,010 units in 2022, according to Statistics Sweden. This followed annual increases of 6.7% in 2021, 0.4% in 2020, and 2.9% in 2019.

Sweden’s housing market is expected to remain subdued this year, amidst continued economic downturn and stubbornly high inflation.

Sweden’s overall economy is slowing, too. The economy grew by a modest 2.4% during 2022, a slowdown from the previous year’s 5.1% expansion, as private consumption was constrained by high inflation, which eroded real disposable incomes, and the increasing burden of mortgage loans as the central bank continues to tighten monetary policy.

There will be a mild recession in 2023, according to both the International Monetary Fund (IMF) and the European Commission, which reflects a slowdown in private consumption as households continue to struggle with high inflation and increased debt servicing costs. Overall, the IMF expects the Swedish economy to contract by 0.3% this year while the European Commission projects a slightly bigger decline of 0.8%.

Local house price variations

Of the eight Riksområden (National Areas), RIKS6 Northern Central Sweden registered the biggest y-o-y price increase of 6.5% during 2022 (but actually down by 4.5% when adjusted for inflation), based on figures from Statistics Sweden. It was followed by RIKS3 Småland with the islands, with a modest 3.3% increase (-7.4% inflation-adjusted), and RIKS8 Upper Norrland, with price growth of 2.3% (-8.3% inflation-adjusted).

The rest of the regions saw falling house prices during 2022, led by  RIKS1 Stockholm production county, with a 6.6% decline (-16.3% inflation-adjusted), followed by RIKS7 Central Norrland (-5.3%), RIKS5 West Sweden (-4.8%), RIKS4 South Sweden (-2.8%) and RIKS2 Eastern Central Sweden (-1.9%).

Nationwide house prices stood at an average of SEK 3,613,000 (€319,417) by end-2022, down by 4.2% from a year earlier.


  Average house prices y-o-y change (%)
National Areas SEK EUR Nominal Real
RIKS1 Stockholm production county 6,508,000 575,339 -6.6 -16.3
RIKS2 Eastern Central Sweden 3,325,000 293,946 -1.9 -12.1
RIKS3 Småland with the islands 2,527,000 223,391 3.3 -7.4
RIKS4 South Sweden 3,662,000 323,727 -2.8 -12.9
RIKS5 West Sweden 3,947,000 348,930 -4.8 -14.6
RIKS6 Northern Central Sweden 2,293,000 202,710 6.5 -4.5
RIKS7 Central Norrland 1,931,000 170,708 -5.3 -15.2
RIKS8 Upper Norrland 2,351,000 207,842 2.3 -8.3
Sources: Statistics Sweden, Global Property Guide

Swedish house prices remain overvalued; households are highly indebted

Despite the recent decline, Swedish house prices remain worryingly high. According to the 2022 UBS Global Real Estate Bubble Index, Stockholm is now out of the bubble territory but house prices are still overvalued, as housing market imbalances remain high.

“Tighter monetary policy has had an immediate effect on Stockholm’s housing market. A large number of potential buyers now do not qualify for the high mortgage loan amounts. A subsequent price slump of more than 10% in the second quarter of [2022] has wiped out all gains accumulated since summer 2021, pushing the index score out of the bubble zone and into overvalued territory,” said the UBS report.

Swedish households are highly indebted. About 64% of households in the country own their homes. Of these, around 81% have a home loan.

“I’ve persistently time and time again said that the debt level in the household sector is just way, way too high and there will be a day of reckoning and eventually rates will go up, and now rates have gone up,” said Stefan Ingves, who headed Riksbank from 2006 to 2022. “What you see happening now is almost exactly what you would expect to see happening, and that is that households have to pay more and the interest rate sensitivity … is much higher,” Ingves added.

Sweden gdp house prices

The loan-to-net income ratio increased to more than 450% in 2022, from 398% in 2019. “High loan-to-value ratios and loan-to-income ratios mean that borrowers may be more vulnerable to various shocks,” said the Swedish Financial Services Authority (Finansinspektionen). “Since new mortgagors tend to have larger loans and smaller margins than existing mortgagors, new mortgagors may be particularly vulnerable to higher inflation, higher rates, and falling housing prices.”

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).

Brief history

Sweden experienced a great house price boom starting in the mid-1990s. The boom was set off by low-interest rates, rapid economic growth, and a 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% (40.7% inflation-adjusted) from 2012 to 2017. And, after falling marginally in 2018, house prices rose again by a cumulative 32.6% (25.8% inflation-adjusted) from 2019 to 2021.

Government market-cooling measures

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.

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, the said temporary exemption expired on August 31, 2021.

Then in 2022, interest rates increased sharply, in an effort to rein in inflationary pressures, which resulted in a huge decline in property demand, as well as house prices.

Sweden  house price change areas

“The average mortgage rate in the 2022 sample more than doubled compared to the previous year,” said Finansinspektionen in its 2022 Swedish mortgage market report. “For new mortgagors, a significantly larger share of their income went to servicing interest costs than in previous years. On average, this figure was approximately 10 percent, which is more than twice as large as the previous year and the highest since Finansinspektionen (FI) began to gather data in 2012. At the same time, a significantly larger share of new borrowers chose variable mortgage rates than in 2021. The share with variable rates in 2022 was the largest since 2016.”

Demand is falling

Property demand is now declining, with nationwide home sales falling by 8.7% y-o-y to 55,010 units in 2022, according to Statistics Sweden. This followed annual increases of 6.7% in 2021, 0.4% in 2020, and 2.9% in 2019.

Sweden home sales

During 2022:

  • In Greater Stockholm, home sales dropped sharply by 15.2% y-o-y to 8,409 units, in contrast to the prior year’s 11% growth.
  • In Greater Göteborg, home sales fell by 7.8% y-o-y to 4,559 units, following a 6.5% increase in 2021.
  • In Greater Malmo, home sales fell by 13.3% y-o-y to 3,282 units, in contrast to the prior year’s growth of 7.5%.

RIKS5 West Sweden, RIKS2 Eastern Central Sweden, and RIKS4 South Sweden accounted for more than half of all sales in 2022.

“For households, it’s just really uncertain about how much higher mortgage rates will go,” said Maria Wallin Fredholm, an economist at Swedbank. “Until this uncertainty subsides, there’s going to continue to be fewer transactions being done with lower bidding activity.”

Foreign demand is more or less stable

Nationwide, foreigners owned 38,065-holiday homes in Sweden in 2022, almost unchanged from the previous year, according to Statistics Sweden. Norwegians accounted for the largest share of 32.5%, followed by Germans (with 28.3% 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. RIKS3 Småland with the islands had the highest percentage of foreign ownership, at 25.2%, followed by RIKS5 West Sweden, at 24.8%, and RIKS6 Northern Central Sweden, at 20.9%.

In contrast, in RIKS1 Stockholm production county, foreign ownership is just less than 1% of the stock.


National Areas Total units Share (%)
RIKS1 Stockholm production county 236 0.6
RIKS2 Eastern Central Sweden 1,012 2.7
RIKS3 Småland with the islands 9,580 25.2
RIKS4 South Sweden 4,824 12.7
RIKS5 West Sweden 9,443 24.8
RIKS6 Northern Central Sweden 7,968 20.9
RIKS7 Central Norrland 2,493 6.5
RIKS8 Upper Norrland 2,509 6.6
Total 38,065 100.0
Source: Statistics Sweden

Residential construction activity weakening

Nationwide, dwelling starts in newly constructed one- to two-dwelling buildings plunged by 19.6% y-o-y to 11,194 units in 2022 and declined by 25.4% to 40,084 units in multi-dwelling buildings, according to Statistics Sweden.

Sweden residential construction

On the other hand, dwelling completions in newly constructed one- to two-dwelling buildings increased by 7.5% y-o-y to 11,163 units last year but declined by 3.7% to 38,227 units for multi-dwelling buildings.

By region:

  • In Greater Stockholm, dwelling starts in all newly constructed buildings plummeted by 33% to 12,510 units during 2022 while completions fell by 20.1% to 11,414 units.
  • In Greater Göteborg, dwelling starts in newly constructed buildings dropped by 17.9% y-o-y to 6,792 units in 2022, while completions increased by a meager 0.8% to 7,509 units.
  • In Greater Malmo, dwelling starts plunged by 49% to 3,442 units during 2022 and completions declined by 36.4% to 3,616 units.
  • In Sweden excluding metropolitan areas, dwelling starts fell by 15.9% y-o-y to 28,534 units but completions increased by 18.4% to 26,851 units.

Rents continue to rise modestly

Before the Covid-19 pandemic, in 2009-2019, rents have risen by about 20%, above the inflation, which was about 12%. However last year, nationwide inflation reached a record 32-year high of 12.3% in December 2022 – more than four times the increase in rents.

Sweden dwelling rents

During 2022, rents for dwellings in Sweden increased by a modest 3% to an average of SEK6,863 (€610) per month, following y-o-y rises of 2.4% in 2021, 2.9% in 2020, 3.4% in 2019, and 2.1% in 2018, based on figures from Statistics Sweden. Over the same period:

  • In Greater Stockholm, rents for dwellings rose modestly by 2.9% y-o-y to SEK7,780 (€691) per month, following an increase of 2.5% in 2021.
  • In Greater Göteborg, dwelling rents increased by 3.2% to an average of SEK6,960 (€618) per month, higher than the prior year’s 2.3% growth.
  • In Greater Malmo, the average monthly rent for dwellings increased by 3.5% y-o-y to SEK7,638 (€678), following a 2.3% rise in 2021.

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 are rising sharply

In February 2023, Riksbank decided to raise its policy rate further by 50 basis points to 3.0%, its seventh consecutive rate hike since August 2019 when the policy rate was just -0.50%.

“Inflation is far too high and has continued to rise. For inflation to fall and stabilize around the target within a reasonable time, the Executive Board has decided to raise the Riksbank’s policy rate by 0.5 percentage points to 3.0 percent,” said the central bank in its February 2023 Monetary Policy Report. “The policy rate will probably be raised further during the spring. Further, the Executive Board decided that the Riksbank will, with effect from April, sell government bonds to reduce asset holdings at a faster pace.”

Sweden interest rates

As a result, mortgage interest rates are now rising rapidly in Sweden. In January 2023, the average interest rate for housing loans stood at 2.67%, sharply up from just 1.47% and the highest rate recorded in recent memory.

By maturity:

  • The average interest rate for housing loans with a maturity of up to 1 year stood at 3.42% in January 2023, sharply up from 1.5% in January 2022 and 1.62% two years ago.
  • For loans with maturity of over 1 year and up to 5 years, the average interest rate rose to 1.76%, from 1.42% a year earlier and 1.51% two years ago.
  • For loans with a maturity of over 5 years, the average interest rate stood at 1.93% in January 2023, down slightly from 1.95% in the previous year and 2.12% two years ago.

“Interest rates have continued to rise, housing prices have continued to fall, and lending to households is increasing at a steadily slower rate,” noted Finansinspektionen in its 2022 Swedish mortgage market report.

Mortgage market growth decelerating

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.

However, in 2022, the size of the mortgage market shrank back to below 70% of GDP, as household’s purchasing power was adversely impacted by rapidly rising mortgage interest rates.

Sweden housing loans

“Swedish households’ loans have risen faster than household disposable income for a long time. This is partly due to low-interest rates and rising housing prices,” said Finansinspektionen. “In 2022 and the beginning of 2023, the economic and financial conditions changed dramatically. Inflation rose sharply, the mortgage rate more than doubled, and housing prices fell. Many forecasters predicted that an economic downturn was on its way. All of this impacted the situation for households, in particular those that bought a home.”

During 2022, housing loans outstanding fell by 4.2% y-o-y to €363.72 billion, according to the European Central Bank (ECB), in contrast to annual growth of 4.6% in 2021 and 10.1% in 2020. 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).

The Swedish economy will likely contract in 2023, inflation remains high

Sweden’s economy grew by a modest 2.4% during 2022, a slowdown from the previous year’s 5.1% expansion. According to the European Commission, private consumption was constrained by high inflation, which eroded real disposable incomes, and the increasing burden of mortgage loans as the central bank continues to tighten monetary policy.

The Swedish economy had been growing by an annual average of 2.4% from 2013 to 2019 before contracting by 2.2% in 2020 due to the Covid-19 pandemic.

Sweden gdp unemployment

There will be a mild recession in 2023, according to the International Monetary Fund (IMF), which reflects a slowdown in private consumption as households continue to struggle with high inflation and increased debt servicing costs. Overall, the Swedish economy is projected to contract by 0.3% this year, based on IMF figures. The European Commission is a bit more pessimistic, expecting Sweden’s economy to register a 0.8% decline.

“The economy is expected to keep contracting in the first half of 2023, before picking up later in the year. Households are set to further adjust their consumption expenditure in response to the loss of real disposable income, high uncertainty, and increasing unemployment,” said the European Commission. “Moderate consumption growth is expected from 2023-Q3 onwards as the inflation shock dissipates, real disposable income starts recovering and the housing market reaches its trough.”

The country recorded a general government finance surplus of SEK 164 billion (€14.4 billion) in 2022, mainly due to both a stronger primary balance and temporary factors lowering the Debt Office’s net lending. The surplus was equivalent to about 0.2% of GDP last year, in contrast to a deficit of 0.2% of GDP in 2021.

Sweden inflation

As a percent of GDP, Sweden’s gross public debt dropped to 31.3% in 2022, from 36.3% in 2021 and 39.5% in 2020. It is among the lowest in the European Union. The Swedish National Debt Office expects the government debt to remain low at 31% of GDP this year.

The unemployment rate stood at 8.2% in February 2023, up from 7.6% in the previous month and 7.9% a year earlier, according to Statistics Sweden. Nationwide unemployment averaged 7.5% from 2009 to 2019 before rising to 8.3% in 2020 and 8.9% in 2021. In February 2023, there were about 458,900 unemployed people in Sweden.

High inflation persists. In February 2023, nationwide inflation accelerated to 12% - close to the 32-year high of 12.3% hit in December 2022, based on figures from Statistics Sweden. This is far above the Riksbank’s 2% inflation target. Inflation averaged just 1.3% in 2000 to 2020, before rising to 2.2% in 2021 and 8.4% in 2022.