New financing model set to reshape Sweden’s housing market

The current financing model for new tenant-owned housing in Sweden largely relies on pre-sales, which slows down the market by placing construction risk on households. To change that, Bostadskreditfonden is taking the lead in introducing a new model based on an insurance-backed guarantee that reduces households’ exposure to risk. The model, called the full subscription guarantee, is now being launched with the aim of stimulating new construction and reshaping the housing market.

The guarantee has been developed together with product developer FRF Partners, insurance broker Gallagher, and insurance company HDI Global Specialty. It allows a highly rated insurer to underwrite the developer’s obligations, ensuring that the housing association’s capital contributions and fees are paid according to the approved financial plan. This, in turn, reduces the need for extensive pre-sales and shields homebuyers from price risk during the construction period. The risk is instead distributed among several stronger market participants, making it easier for households to buy once construction is underway.

– The current financing model no longer works. Banks still operate as if property prices will rise indefinitely, requiring that 70 percent of the apartments in a new development be sold before construction can start. During the period of interest-rate hikes, housing starts dropped by 60 percent. Significant value has been lost, and construction companies, households, and tenant-ownership associations have all been affected. According to Boverket, Sweden needs 523,000 new homes by 2033, more than 50,000 per year, yet fewer than half that number were started in 2024. It’s time to act for a more sustainable market, says Lottie Löf, CEO of Bostadskreditfonden.

The model has been tested in pilot projects showing that project profitability can increase by around 25 percent while total project timelines can be shortened by six to eight months. The positive outcome stems from projects starting earlier and a significantly higher share of units being sold after construction begins, a fourfold increase when pre-sales are reduced from 80 percent to 20 percent. Buyers are more willing to commit once construction is underway, which supports higher sales prices. The improved profitability allows more projects to be realized. The guarantee also helps unlock housing market mobility, as buyers can purchase closer to completion and sell their existing homes at the same time.

– Our goal is to accelerate and improve residential construction by providing safer and simpler financing alternatives. This model creates a more stable market for everyone by transferring risk away from households and spreading it among stronger participants. Based on our calculations, it could enable the level of housing construction needed to meet Boverket’s targets for a balanced market. It’s a necessary adjustment to secure the housing production Sweden urgently needs, says Lottie Löf.

 

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Here’s how the full subscription guarantee works.