Sweden of Copenhagen can now buy in
Sweden is the fourth largest country in Europe with major corporations already established like Ikea and Saab. It has a small population considered to Britan which is only half the size and the cost of living is higher but real estate is less expensive in Sweden. A member of the EU, but still has not adopted the euro and uses the Swedish krona (SEK) with a GDP per capita that is approximately fifteen percent higher than the EU25 average. Sweden is amongst the ten wealthiest nations in Europe. Cottages start from 40,000 and villas starting from 100,000 (22).
The cities with the most activity when it comes to real estate are Gothenburg, which is located on the west coast and has a major port and industrial center with a vivacious downtown center. Malmo which is located on the south cost is seen having the most potential due to the completion of a new bridge and tunnel connecting it to Copenhagen. Since the housing prices are lower in Sweden due to the Swedes proffering to rent rather than own, the people of Copenhagen can now buy in Sweden for less and commute to work via the new bridge.
In south Florida we also experience home buyers purchasing where home are more affordable and commuting to work, an example of this would be home buyers that work in the upper Keys in Florida and purchase homes in Homestead since the prices are more affordable. Stockholm also has a strong housing market (22). In 2006 the Swedish property market had a strong increase in prices by 11. 37% which was substantially higher than the increase of 9. 63% rise in 2005.
The three major cities have had a strong increase in housing prices with Stockholm (12. 77%), Giteborg (10. 50%), and Malmi?? (13. 53%). Since the rental market has been suffering with a lack of properties, in 2006 there were a total of 29,832 dwellings completed compared to the 23,000 in 2005 and considerably higher than the 12,000 dwelling average from the years of 1995-2000 (23). From all the rent controls and tax rates in Sweden it is seen as unprofitable to purchase homes with the intention of renting them. When negotiating private rents, the rental rates are compared to social housing rents which are low and well below the market rents.
A large portion of the population (approx 8%) is currently waiting to move into a new unit with an average waiting period of 10 years, since developers do not have any incentive to build more rental units (23). Since the rental market is such a problem in Sweden they are in desperate need for a change to help eliminate this extreme shortage in properties. In order to address this situation the Alliance for Sweden, a coalition that is headed by Fredrik Reinfeldt has had the housing system on its agenda since the electoral vote in 2006.
They are trying to have the rental ceiling removed and allowing the private housing companies to no longer be bound by the rent levels that are set by the public sector which would allow for higher yields “see exhibit 5” for investors (23). The current yields that are obtained by investors are considered to be low to moderate. Mid size apartments in Stockholm have the highest yields that are between 6 to 7%, when the size of the property changes they then get a yield of about 3 to 4%. In the suburban areas of Stockholm, investors tend to obtain a yield of approximately 3 to 5%.
Since the rental rates are tied to the age of the property, the higher yields are tied to the newer properties versus the older ones (24). Taxes The taxes of a property are established via a periodical real estate assessment; the assessment is done periodically in order to reflect the prices changes in that market. A national property tax is charged to private dwellings, residential buildings and farms as well as rented residential or business. The real estate tax is calculated on the basis of the assessed taxable value.
An incentive that has been put in place to help promote the construction of new homes comes in the form of a tax break. If a residential building or any part of that residential building has been constructed from 1991 or later is not taxed for the first file years and after the first five years the tax rate is deducted by 50% a year for the next five years. Living area in residential units and homes are taxed at a rate of 1. 2% of the taxable value and at 1% for floor space that is used other than for living like for a garage.
The assessed value of a property is about 75% of the market value. When selling a home if you sell the home in May, you only have to pay taxes for January through May and then the purchaser of the home would pay for the remaining of the year. When it comes to the payment of taxes the taxing authorities administer an account to everyone that has to pay taxes and the taxes are paid monthly. If the estimated taxes that have been paid monthly end up being more or less than the actual tax amount a refund will be given or a bill in the amount that is owed.
The national income tax is 20% with a local tax ranging from 26-35%, and capital gain tax at 30%. When a private residence is sold half of the sum of the capital gain is taxable. It is possible to defer payment of capital gain if the seller purchases an equivalent property within one year of the sale. When talking about commercial properties the capital gain can be taxed at 90% and if the income from the sale of the assets exceeds SEK 50,000 they can also be taxed (7).
There are three categories for taxable income in Sweden; the first is income from employment, then income from capital and investment, and profits from a business. When thinking of rental income it is considered to be income from capital and is taxed at a flat rate of 30% for residents and also non residence. When a property is leased, the cost that are incurred from the lease are not deductable, instead of allowing for deductions on the cost of the lease, they have a general deduction of i?? 435 per property is allowed and also an additional 20% is deducted off the annual rental income.
When business is taxed from rental income it is considered business income and is taxed at a rate of 25%, and they also have to pay a national tax “see exhibit 6″(25). Net wealth taxes are levied at the rate of 1. 5% of the net wealth of a household, with a tax threshold of SEK1. 5 million (i?? 163,049) for a single person and SEK3 million (i?? 326,098) for married couples who are filing jointly. Net wealth tax would be reduced if the combined wealth and income taxes exceed 60 percent of the total taxable income (25).
Government Powers The Land Code is the most important statute that governs real estate; the major areas covered by this statute are buying and selling of properties, easements and mortgages, and the rights of use in real property. The Planning and Building Act regulates the use of land and buildings and the Property Unit Act which deals with the formation of and changes in real estate units. In Sweden the municipalities are all independent and they draw up there own layout plan.
The detailed developmental plan contains all the plans for specific regions and all the construction of the new buildings, when a new plan gets approved it is then placed on the detailed developmental plan (8). In Sweden before you construct a new building a permit must be obtained from the municipality, just like in the US when you want to add an addition or build a new building you need to get permits, this is a way for the government to make sure that the work has been done in a good manor and by a licensed professional, even if reconstructing an existing building.
When a building permit is taken out on a property, that permit stays with the property and is also valid for future owners. Once all the work specified by the permit has been done the municipality needs to be contacted so they can have someone go and check out the quality of the work and once everything is fine the municipality issues a certificate of compliance.
If you want to appeal a decision that has been made by a municipality you can always go to a court of law to try and settle the dispute and in some cases you can appeal it to the Government. All zoning restrictions for a particular property are available for review through public records and should be reviewed before purchasing a property, even thought the seller is obligated to disclose any information regarding zoning and any restrictions.
To obtain a permit you have to pay a small fee and they vary for all municipalities. The timing to obtain a permit varies depending if the permit is used to reconstruct an existing building or to construct a totally new one, between three months and two years and this also depends if there are any appeals which could make the process even longer. All the requirements for permits can be obtained in the Planning and Building Act (9).