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Will "uncertain" market cure Sweden's rental squeeze?

Economist: I expect more budget rental apartments to be built
2:18 min

Everyone arriving in Stockholm, Gothenburg, or Malmö faces the the same problem: the near impossibility of renting a flat. But with a developer this week saying it will rent out 90 Stockholm flats, rather than sell them, might the rental squeeze be starting to ease?

Wallenstam, one of the biggest property developers in Stockholm and Gothenburg, on Monday announced that it would switch 90 apartments in its Orangeriet development in Solberga to rentals, after judging that the market for apartment sales was "uncertain". 

"The need for "hyresrätter" [rental apartments] is enormous and continues to rise," Mathias Aronsson, the group's Stockholm head said in a statement. "There are about 590,000 people in the queue for Stockholms Bostadsförmedling and around 30,000 people in Wallenstam's queue for flats in newly produced rental blocks." 

Swedbank's private economist Arturo Arques told Radio Sweden, "We have seen now one large company [deciding to rent new flats rather than sell them], but it remains to be seen if more companies want to do the same."

Arques said the reason why rental apartments are so hard to come by is that developers have been concentrating on building apartments for sale for about ten years, and have tended to target high-end buyers. 

"The problem is that the bostadsrätter [flats for sale] which are being built now are quite expensive and luxurious, and the demand we see today is from young people and newcomers to Sweden that can't afford these apartments, that's one of the biggest problems right now, especially in Stockholm," said Arques. 

As developers like Wallenstam struggle to sell luxury developments at the prices they had hoped, Arques expects them to start targeting the lower end of the market, opening up more rental properties for new arrivals. 

"I think it will happen, because I think the companies want to build apartments and try to make money even for that segment, but it's been so profitable to build expensive apartments in very high demand areas," said Arques, adding, "Now they see some sort of decrease in demand, so they probably will change their choice of quality and location for the apartments."


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