Sunday, May 13, 2012

Why the Swedish housing market scares the crap out of me

So we are looking at buying a house again. We do this periodically, but let's just say I am afraid of commitment. The Swede and I are polar opposites on this subject, and I like to hope that will mean we will eventually make a great compromise. I LOVE to look at houses and dream about living in them, but the thought of buying one scares the living bejeebus out of me. The Swede falls in love with practically every house we see and is seriously disappointed every time we end up not making the purchase.

So here are my fears about buying a house in Sweden:

1) The housing market reminds me of the American housing market circa 2008 - Prices just seem to keep going up. They cannot go up inevitably. We live in a HCOL area. I don't think they will come down much. And I don't look at buying a house as an investment. And thankfully people here don't own 3 houses at a time, like they did in the peak in the US. But really there must be a limit. Incomes don't vary too much here, who are these people who can afford these homes?

2) No one in my generation seems to actually own their houses - They just pay interest on their 'bottom loans' and only work to pay off the top loan, which is like 20% of the loan. Which means, for me anyway, that you are just always renting your house from the bank. Seriously, you do not have to amortize your bottom loan. Crazy pants.  (FYI You can take out a bottom loan for about 70-80% of your home's value).

3) You cannot get a fixed interest rate for more than 10 years, and you are discouraged from even taking that - There is a huge difference between the long term interest rates and banks encourage you to take the variable interest for the WHOLE sum. Again... crazy pants. Thankfully you can buy insurance to protect yourself from too much movement in the rate, but still, I WANT MY 30 YEAR FIXED MORTGAGE RATE!!!!

4) You buy it you own it - Sure you may be permanently indebted to the bank, but you are permanently indebted to the bank. What I mean is, even if your house loses value, you owe the set amount to the bank. Foreclosure smorclosure. You owe the money NO MATTER WHAT. You would think this would make the banks a little more careful. Nope. Not so much.

I get that this is how the Swedish market has worked for ages. I get that, despite a bit of chaos in the 90s it seems to have survived. But I still feel like my generation ends up being the one totally f-d by this system. Because we are the first to be sitting around with over 2 million crowns in debt, on average. What happens if things turn sour?

Do you get why I am so terrified to buy a house? Even if today we totally looked at what could be a dream home?


  1. It's of course wise to be careful and to think of things like "can we still pay the interest in case it increases so and so percentage?". However, I feel the market here in NYC is worse when it comes to buying. No matter if it's an apartment och a house. Well, could be just a cultural difference and that we are used to different things, but talking about high prices, NYC is sure over the top!!! AND here I feel that it's so much more to think about. More people in the "chain" that might want to basically "screw" you and just get your money. Like you MUST go through a broker. And this only for LOOKING at available apartments in the city. You PAY the broker a lot of money for this. And IF you happen to find something there is tons of stuff that still might go wrong and in the end you might have payed lots of money for NOTHING! That recently happened to friends of mine here. SCARY!!
    And yes, about payment of your loans in Sweden of course you pay more if you'd want to (and can afford it) i.e amortize more to decrease the actual loan.
    But sure, it is always scary to buy something. On the other hand if you calculate what you pay in rent every month and get nothing back for those money, very often you realize it's almost as much as you would pay for having your own house/apartment. Sure, in case the market falls heavily you might end up with loans and no house/apartment but I feel that if you are a little more sensible about how expensive home you'll buy you can still do this and be happy in the end. For me (after being a "New Yorker" for more than 6 years) I feel that Swedes very rarely wants to live in smaller homes and because of this they end up with very expensive houses/apartments?? I think that IF you would be ok with living a little smaller you could buy something which is not crazy expensive, and with time you might be able to either "switch" to something bigger or to enlarge the house. I have friends who did exactly that. They bought a considerable "small" house (I think it was around 70 m2) and after some years they have expanded the area and now have larger house. Wince they could do this, they do not have huge loans (even though I'm sure they are still pretty high) but it's very often a more economical way to get your "dream house" in case you do not want to take huge loans in the first place.
    Well, good luck!!!!
    We still rent here, and for a crazy high sum per month. Maybe some day we will move from this fantastic, yet crazy expensive city, and be able to buy something...?! :-)

  2. That's exactly why I am terrified too, glad to hear I'm not alone :)

  3. We were also terrified of buying anything on the Swedish market but now we came to the point where we had to. We are currently renting an apartment from a guy that is in the states but he is coming back and let us know that we had to find a new place to stay from August and on. I can totally understand that the housing market is scary to you but it is so different from the American housing market. We did buy a house in Alabama and had to sell in in the middle of the economical crisis. We did make quite a loss on the house but at least we did get it sold (after 18 months). Now we just bought a home here as the renting market is practically non-existent. The thing with Stockholm is that even if a lot of new homes are built there is still a major shortage of houses and condos and that makes this housing market totally different compared to the American real estate market. I think you should go ahead and buy a house if that is what you both want without beeing scared of the real estate market crashing because I don´t think that the prices will drop substancialy. Even if most people just pay off their top and bottom loans we have decided that it is important to us to also actually start paying off on the home. So you are certainly free to do so and should be encouraged to do so. The market is just so different here that the two can´t be compared. I hope you do find a nice house that you both fall in love with.
    Good luck house hunting.

  4. The first point about who can afford to buy these houses is one that my husband and I have wondered about a lot. As you said salaries here don't vary that much and in my opinion are quite low so I'm constantly amazed at how high the prices in at least Stockholm are. I'm thinking many people must have taken out mortgages that they really can't afford. But then, what do I know :)


  5. Hello there!

    My name is Malte Zeeck, and I am with I really enjoyed reading your fantastic blog! I think expats in Sweden and around the world could really gain some great insights [and have a few good laughs] on this page. The quality of the blog in general is very convincing, which is why I would love to feature you and your writing on the Recommended Blog on Sweden section on
    Not only do we feature and link to your blog prominently; we also would like to hear from you directly in our questionnaire! We have also designed a link badge for your blog.
    If you are interested, please feel free to contact me via email:
    Malte Zeeck

  6. Oh I agree it is pretty crazy and scary, and it's probably the only place in the world where monthly repayments are much cheaper then renting - catch 22...

  7. Another thing about Sweden is that you also don´t have much of an alternative beside buying. There isen´t much of a renting market unless you have signed up and been signed up for some 20+ years. Renting from someone else who owns the condo makes it very expensive. We would have liked to continue to rent but it turned out that the monthly cost would be a lot more if we had rented "second handly". The best solution seemed to buy something which we just did.

  8. @saltistjejen - Maybe there is just some comfort in a system you know? We sold my grandma's apartment in NYC a few years ago and were really happy with the broker, but that was right before the market dropped. I know when she tried to sell in the 90's no one would touch it with a 5 foot pole.

    @Desiree - Congrats on your purchase! That's exciting, hope you enjoy it! And totally agree with you, you are kind of forced into buying if you haven't been on the waiting list for 18 years.

  9. Yes the STCKHLM market is very scary... And in Sweden, "you can't walk away...".

  10. Im not a worrier and when I wanted to buy a house - I bought a house.
    I bought it in 2007.
    It lost about 20% value but we are back up now and about 5% over.
    I bought it as a home not an investment.
    Ive never regretted buying.

  11. You were scared back in 2012, what about now? Yesterday's rate cut tells you that the market is about to go bust. But of course it's cheaper than ever to borrow money, at least if you're a bank...