Ilya Batjan is the founder of a company with the difficult to pronounce name Samhallsbyggnadsbolaget I Norden AB. Samhallsbyggnadsbolaget I Norden AB translates from Swedish to English as Social Building Company. This company is a real estate fund better known by the acronym SBB. Batjan was born in Montenegro and moved to Sweden in the 1990s during the Balkan Wars. In the Scandinavian country, he graduated with a degree in Economics and a PhD in Demography and Elderly Care Planning. He then became a successful politician under the banner of the Swedish Social Democratic Party. After serving as the mayor of a small town in Stockholm County, he gave up everything in 2011 to work for a real estate company. Although the company fired him, Batjan already knew his future was in the field, and in 2016 he founded SBB with big and risky goals. That meant pursuing health centers, nursing homes, public schools, and even real estate investments. It will be installed at a police station and the facility will be leased to local governments.
His gamble paid off. In less than 10 years, he has built his business portfolio worth $13 billion. Most of the company’s investments are in public housing and municipal land in the Nordic region, which it acquired thanks to a series of cheap loans. By the end of 2021, SBB owned approximately 60 million square meters of real estate, equivalent to 20 Empire State Buildings. But today, SBB has become a symbol of an industry struggling in the face of soaring mortgage prices (as interest rates rise and currency values fall) and runaway inflation (which peaked at 12.3 in December last year). %, highest in over 30 years), household debt is high. After hitting a record high in the second quarter of 2022, house prices have begun to decline. “Since then, stocks have fallen about 12%, which means they’re down more than 20% in real terms,” said Andrew Kenningham, chief economist at London-based research firm Capital Economics. talk.
“There has been a significant course correction,” said Daniel Krall, senior economist at Oxford Economics. But analysts say this situation does not constitute a bubble bursting. “We may see further declines in the coming months, but eventually prices will return to the same level as in 2020,” said the chief economist at SEB, Scandinavisca Enskilda Banken AB. Jens Magnusson explains. However, the situation remains concerning due to the family’s large debts. In Sweden (population 10.8 million), owning a home is almost always easier than renting, and mortgage debt accounts for 83% of total household debt, according to the country’s financial regulator. Swedes have twice as much debt as Germans or Italians. According to the Organization for Economic Co-operation and Development (OECD), real estate accounts for 18% of bank lending, three times as much as in Spain.
After the last financial crisis, house prices and debt rose as interest rates fell. From February 2015 to the end of 2019, his loan interest rate was negative for almost five years. The interest rate now stands at 4%, providing an incentive for people to secure assets while the economy is strong. Sweden’s average annual GDP growth rate from 2008 to 2021 was 1.7% (twice as high as for the EU as a whole). The Nordic model was praised, and its politicians puffed up their chests as much as possible. But deep down there was a problem. “There was a structural imbalance emerging,” Krall said. On the demand side, population growth and ultra-low interest rates were not fully offset by real estate availability. Prices then began to rise due to the high yields enjoyed by the home flipping business. “The Swedish market has experienced a typical boom-bust cycle over the past 15 years,” says Kenningham. “Prices doubled between 2007 and 2022, the largest increase among the most developed countries.”
The situation becomes even more uncertain when looking at financial commitments between households. On average, household debt represents about 195% of disposable income (after tax). This metric is a cause for concern, especially as interest rates on its debt rise. And in a situation where the majority of mortgages (60%-70%) are contracted with variable interest rates. “The combination of high household debt and variable loans makes Swedish households and the economy more sensitive to monetary policy decisions,” emphasizes SEB’s chief economist. “While we are not particularly concerned that households will not be able to repay their loans, other spending could fall significantly, which would eventually contribute to the economic slowdown,” he said. says. According to forecasts, Sweden will be the only country in Europe to fall into recession at the end of this year.
domino effect
The downturn in the housing market has already hit the construction sector hard, with investment falling along with heightened uncertainty and rising costs. “In a good year, we see about 75,000 new housing starts. We’d be lucky to see 25,000 this year,” Magnusson said.
Sweden knows what a housing crisis is like, a country whose rental market has been controlled since the late 1940s but where people have to wait on average around 9.2 years to secure housing through the system. In the early 1990s, after strict mortgage restrictions were lifted, the market crashed, leading to the nationalization of two banks, the bailout of a third (with losses equivalent to 12% of GDP), and the devaluation of banks. caused a major crisis. Krona. It took almost four years for the country to recover from the shock. At the time, SBB founder Ilya Batjan had just landed in Scandinavia and had no idea what fate awaited him 30 years later. He probably never imagined he would become what he is today or the size of the billion-dollar business he built, but his credit rating was downgraded to junk bond status and he became CEO. was forced to resign from his position. . But what is Caesar’s is to Caesar. Batrian still holds his 8.3% of the company’s stock and nearly his 32% of the board’s voting rights.
Apply our weekly newsletter Get more news coverage in English from EL PAÍS USA Edition