Buying a property in Sweden

While there are intense controls on the power of landlords the Swedish rental market is a solid one.

Sweden has one of the strongest systems in place to protect tenants, which may make some investors in residential property a bit cautious. For example the local rents are set by a committee and tenants have unions which negotiate with landlords – who are overwhelmingly large investors that own dozens of blocks – to keep prices at a low rate.

Swedish rents also include the price of utilities such as heating and electrics. The downside of such a system is that there tends to be a limited demand for property developers to build new units in Central Stockholm as the yields will be very low and rents may be in the region of £500 per month on average.

There is also the problem that this creates a strong demand for sub-letting, with tenants letting out their properties at what you may call ‘market rates’ and then pocketing the difference between their lower rents and the amount they are charging to their tenants.

The owners of flats are also limited in who they can rent (sublet) their flats out to, with many housing communes stating that they cannot rent them out for more than one year for example.

As a result of the complicated laws around property in Sweden it is very difficult to rent a property in the same way you can in London, and as demand significantly outstrips supply it can mean that finding a flat is very difficult.

From the point of view of an investor the advantages to the Swedish system is that tenants tend to be long-term, which means that voids are unlikely. Investing in commercial property offers additional benefits in that you are likely to attract a high-quality tenant given the intense competition to find space in a city renowned for its startup expertise and new technologies.

As far as foreigners are concerned, there are no restrictions on buying property if from overseas. However the laws in Sweden may deter some. If you wish to increase rent then you need to formally state this to the tenant who has the right to appeal if they feel the increase is unfair.

Tenants can give three months notice to end their agreement, while a landlord may find it very difficult to remove a tenant if they have not behaved in an anti-social or criminal manner. Tenants also have the rights to repaint a property, install internal doors, retile and lay new carpet without the landlord’s consent.

The cost of buying by comparison is comparatively stress-free, with the buyer of a property paying a stamp duty fee of circa 4.25 per cent.

The rules around houses and apartments are also different. While you would require permission from the housing commune to sublet a property, you would not require such permission if you own a detached house.

The rules around property in Sweden are extremely complex and the aforementioned should not be relied on as the sole source of information to purchase a property in the Scandinavian nation.

With Sweden experiencing something of a housing crisis it is likely that there may be some significant changes to the law in the coming years.

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