The housing crisis in France is increasingly serious, but this is also the case for our neighbors in Europe, particularly in Sweden and Ireland.
The Swedish Central Bank is warning of the growing risks posed by the real estate market to the country’s financial system during this period of inflation. The current situation is reminiscent of the beginnings of the 1992 crisis, which plunged Sweden into a deep economic recession.
Since then, a certain number of safeguards have been put in place to reduce the risk of bank failures in the event of a real estate crisis. However, in less than 20 years, property prices have quadrupled in Sweden, driven by very low interest rates, almost non-existent property taxes for homeowners, and an insufficient housing supply. In one year, the real estate market lost on average 15% of its value and in certain regions sales collapsed by 40%.
At the same time, housing construction has also slowed down sharply due to inflation, raw material costs and the collapse of the crown against the Euro. All these factors are aggravated in Sweden by the fact that the rental market is dysfunctional because it is a regulated market, a good idea initially, but which over time has become so complex that on average it takes 11 years to access an apartment in Stockholm. This puts even greater pressure on Swedes to become property owners, and therefore to go into debt.
A Swedish real estate giant in great difficulty
The Swedish commercial real estate giant SBB owns offices, schools, hospitals and all kinds of buildings that were formerly public, but which were sold to SBB by the municipalities to make quick cash. This group is saddled with a debt of nearly eight billion dollars, including $1.5 billion to be repaid over the next 12 months.
SBB is quickly looking for buyers to avoid bankruptcy, which could not only have an impact on the entire financial sector since commercial real estate represents a very large share of bank loans, but the fall of SBB would also jeopardize the operation of public services in several cities across the country.
In Ireland, increasingly high rents
Ireland is also facing a housing crisis with rents continuing to increase and supply continuing to decrease. Indeed, thanks to its very attractive tax system, Ireland has been able to attract large tech companies. Tens of thousands of expatriates, with very comfortable salaries, have joined the ranks of rental candidates. However, faced with these massive arrivals, the supply of real estate has unfortunately not kept up.
On Daft, the country’s main property listing site, there were only 700 homes available for rent in Dublin in June this year and the listings don’t stay up for long. For Katherine, 26, it’s a real obstacle course. “Here you take what you get. Some of the places I visited were terrible with mold everywhere! She says. Yet there will still be a queue of around 100 people outside who are obviously looking to rent the apartment.”
The situation is so tense that many young people are even forced to stay with their parents before finding their own accommodation. This was the case for Alex, 28 years old. “Rather than sleeping on the streets, my parents were happy to have me back. So I was lucky in that respect. But it’s still frustrating, because you feel like your life is on hold.”
The 2024 budget has just been adopted in Ireland, and it does indeed contain measures in this direction, such as investment in the construction of new housing. However, these measures take time and for this generation who say they are being sacrificed, the solution is immigration. In fact, more and more of them are leaving the country, particularly for Australia, which offers new future prospects for these young Irish people.