Stockholm is becoming a sanctuary for the rich

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Stockholm’s rent prices have skyrocketed in the last decade because of its new status as a tech city.
IKEA property developer Jonas Spangenberg is worried that there is a shortage of affordable housing.
Sweden is unlike its neighbor, Finland, which has fixed prices in its municipalities in order to help apartment renters.

It’s no news that Stockholm’s housing market has gone bananas: After Toronto, the Swedish capital faces the world’s highest risk of being in a housing bubble, according to UBS. Apartment prices have more than doubled in the past decade, even despite historic levels of new construction.

No surprise then, that the land under the new flats gets expensive too. But in the last 12 months, land prices have all but lost touch with reality in Stockholm.

“With these land prices, you won’t get any apartments that normal people could afford,” says Jonas Spangenberg, CEO of Boklok, a property development joint venture between Ikea and Swedish construction firm Skanska, to Dagens Industri.

Tommie Hansen/FlickrFor the biggest seller of all, the municipality of Stockholm, its good news: revenues from land sales have in the last three years gone from $ 30 million (SEK 255 million) to $ 500 million (SEK 4,2 billion), a growth of 1500 percent, reports Di.

Spangenberg believes this results in Stockholm becoming a sanctuary only for the rich.

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This graph, by Nordic banking group Nordea, shows how real estate prices have developed in Stockholm since 1875 (notice the spike). This price surge is now being felt in the land purchase business. Tweet by Chief analyst Nordea Markets, Anders Wallström.

Jonas Spangenberg is worried the sky-high land prices will create an acute shortage of cheap housing in the Swedish capital, and that “in the longer term, the municipality will lose its competitiveness, when large groups of people [are excluded],” the Boklok CEO says.

Boklok, founded in the 90s as a joint venture between Ikea and Skanska, develops sustainable housing concepts. The company builds around 1000 new housing units per year across the Nordics. Boklok says it abstainins from building apartments in Stockholm, in favor of cheaper municipalities.

According to Håkan Falk, in charge of property development at the City of Stockholm, the land price surge
is the result of a general spike in housing prices — and growing interest in the city’s land. Di speculates that new developers, keen on getting new projects in the portfolios, have contributed to a “full-blown speculative bubble”.

“There are many players who I have never heard of. I have not the slightest idea who they are,” says Johan Skoglund, the CEO of property developer JM, to Di.

The open bidding model of Stockholm stands in stark contrast to Finland’s, where many municipalities set a fixed price on land. In this model, those developers who are able to offer the cheapest living prices for apartment buyers, win.

In central Stockholm, a square meter of land intended for high-rise flats now costs around $ 4750, according to Di. In, Helsinki, Finland, prices range between $ 500 and $ 2900, according to Rakennuslehti.