Investors' capital allocation into office and residential markets in ...

Chapter 4
Country overview
4.1 Sweden
Sweden is situated in northern Europe and considered to be the largest country in the
region. Stockholm is the capital of Sweden. The density of population is 22 per sq. km.,
the lowest in Europe. There are 9 million people reside in the country. The wealth is
distributed homogenously, which makes Sweden a prosperous country. There are three
main industrial and financial centres in Sweden such as Stockholm (population in
metropolitan area is 2 million), Gothenburg (population in metropolitan area is 905,729)
and Malmö (population in metropolitan area is 628,388).
As for the economic condition, Sweden is an export-oriented market. There has been
privatization going on with the social reforms. Communication services and
pharmaceutical industry favour the growing economy. Compare to other countries in
Europe, Sweden has performed quite well during the global economic crisis in the mid-
2001. Its GDP growth is forecast at 2.4 per cent this year though it is going to decrease to
1.2 per cent in 2009. Rising energy and food prices caused the increase in the inflation
rate. In the later part of H1 2008 the inflation rate was 4.4 per cent. Due to the weakening
economy the slow increase in the employment rate is expected this year. Private
consumption is forecast to grow by 2.4 per cent and disposable income will increase up to
3.1 per cent in 2008 and by 2.3 per cent in 2009. However, due to the weakening labour
market and slowing house market the saving ratio increases. The consequences of the
slowing global economy, caused by the credit crunch in US, had a slight effect on exports
in Sweden. In 2008 the expected growth in exports is 5.2 per cent which is lower
compare to 5.6 per cent last year. Sweden’s most important export market is Western
Europe (Newsec Nordic Report, autumn 2008, see Table 4).
In Q1 2008, house price index was quite strong at 9.1 per cent, which is marginally lower
than in Q4 2007 when the price index was 10.6 per cent. Despite of the low transaction
volume, northern part of Sweden had highest rates of growth at approximately
13 per cent over the financial year (Q1 2007–Q1 2008). Due to the Oresund Bridge,
which connects Sweden and Denmark, Skåne region in southern part of Sweden, had
high transaction volume at 5 per cent (over the financial year Q1 2007-Q1 2008), which
is lower then national average rate. Stockholm had rates of growth at 10 per cent over the
financial year (Knight Frank report, May 2008, see Table 4.1).
The Riksbank, the Swedish national bank, was influenced by the global slowdown in the
economy and expensive monetary policy and had to raise the repo rate in July from
4.0 per cent up to 4.5 per cent. However, in October 2008, the repo rate was decreased by
0.50 per cent to 4.25 per cent (Riksbank, 2008).
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