Is buying a property in Östermalm a good investment?

Last updated on December 29, 2023

Yes, the analysis of Stockholm's property market is included in our pack

If you've enjoyed the central location and upscale living of Östermalm, you may have contemplated buying a home in this Stockholm district.

Is it a good idea though? What's the current state of the real estate market in that area? Are property values appreciating or depreciating? Are investors seeing returns on their real estate investments? How's the demand for rentals?

We'll answer all these questions for you! When building and updating our property pack for Sweden, our team has been researching and surveying this area. In fact, there is significant customer interest in investing there. Therefore, we believe it would be beneficial to include some information about it in our property pack.

Why do property buyers like investing in Östermalm?

Östermalm, a district in Stockholm has a distinctive appeal for property buyers, primarily due to its blend of historical charm and modern amenities.

This area stands out in the Stockholm real estate market for several reasons. First and foremost, it's known for its elegant architecture. The buildings in Östermalm, many of which date back to the late 19th and early 20th centuries, offer a sense of history and grandeur that's hard to find elsewhere.

This architectural allure is complemented by well-maintained streets and a clean, orderly environment, making it visually appealing.

Comparatively, Östermalm offers a more upscale living experience than other areas in Stockholm. It's akin to comparing a luxury vehicle to a standard sedan – both serve the same purpose, but the luxury vehicle offers an enhanced experience.

This district is known for its high-end boutiques, fine dining restaurants, and exclusive clubs, setting it apart from more bohemian or family-oriented neighborhoods like Södermalm or Vasastan.

Östermalm's popularity as a prime location dates back to the late 19th century. It became a sought-after area for the city's elite, a trend that has continued to this day.

Its enduring appeal is not just a result of its aesthetic and historical significance but also due to its strategic location. Proximity to the city center, excellent public transportation, and easy access to Stockholm's business and cultural hubs make it a convenient choice for residents.

Whether this hype will remain is subject to speculation, but given its established status and ongoing demand, it's likely to remain a prestigious address.

The district attracts a diverse range of individuals, but predominantly, it's favored by those who seek a luxurious lifestyle.

This includes business professionals, diplomats, and affluent individuals who appreciate the finer things in life. They are drawn to Östermalm for its exclusivity, safety, and the high standard of living it offers.

However, Östermalm isn't without its drawbacks. The cost of living here is significantly higher than in other parts of Stockholm. This includes not just property prices but also the cost of amenities and services.

For some, this can make it feel a bit exclusive and less diverse in terms of socio-economic demographics.

Additionally, the area's emphasis on preservation and upscale living can sometimes translate to a lack of vibrant, grassroots cultural activities that are more readily found in other districts.

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Why is Östermalm a nice place to live?

Östermalm is often regarded as a prestigious and desirable place to live, and there are several factors contributing to this perception.

The lifestyle and culture in Östermalm are characterized by an upscale and refined atmosphere. This district is known for its elegant architecture, beautiful parks like Humlegården, and a plethora of high-end boutiques and fine dining restaurants.

This contributes to a sophisticated urban living experience, blending the charm of historical Stockholm with modern luxuries.

The expat community in Östermalm is quite vibrant. Given its status as an affluent neighborhood and its proximity to central Stockholm, it attracts a significant number of international residents.

Expats often choose Östermalm for its safety, the quality of life, and the ease of integrating into the community. English is widely spoken, which eases the transition for many international residents.

Living in Östermalm does come with a higher price tag compared to other parts of Stockholm. The cost of housing is among the highest in the city, reflecting the desirability of the area.

This is coupled with the higher costs for dining, shopping, and entertainment, given the upscale nature of the establishments in the area. Many residents find the quality of life justifies the expense.

Safety is a notable advantage in Östermalm. It is considered one of the safest districts in Stockholm, with low crime rates. This sense of security is a significant draw for families and individuals alike, contributing to the overall appeal of the neighborhood.

In terms of amenities and facilities, Östermalm is well-equipped. For education, there are reputable schools like the English School and Östermalm School. Healthcare facilities, including Sophiahemmet Hospital, provide high-quality medical care.

For shopping, there are numerous options ranging from local boutiques to luxury stores, with places like Sturegallerian and Fältöversten serving as popular shopping centers.

The quality of infrastructure in Östermalm is excellent. The roads are well-maintained, and the area boasts reliable utilities and high-speed internet connectivity, catering to the needs of both residents and businesses. This makes it an ideal location for those who require robust infrastructure, whether for work or personal use.

Accessibility is another of Östermalm's strengths. It's well-connected to other parts of Stockholm and major transport hubs. The district is served by several metro stations, including Östermalmstorg and Karlaplan, making it easy to travel to and from the city center.

For those looking to travel further afield, Stockholm's central station is easily accessible, providing connections to other cities and countries. The proximity to Stockholm's airports, like Bromma and Arlanda, adds to the convenience for international travel.

Public transportation options in Östermalm are plentiful, with a comprehensive network of buses and metro lines. The public transport system is efficient and well-regarded, making it a convenient option for commuting or exploring the city.

How much does it cost to buy real estate in Östermalm?

If you need a detailed and updated analysis of the prices, rents and yields, you can get our full guide about real estate investment in Sweden.

Buying a property in Östermalm is often seen as a significant investment due to the prestige and desirability of the area.

The residential properties available in Östermalm are predominantly apartments, including classic apartments in historic buildings, modern flats, and luxury penthouses. Houses and luxury villas are less common but can be found in certain parts of the district.

The high demand in Östermalm is primarily for apartments, particularly those with historic charm or modern luxury features, due to the urban setting and the appeal of living in a culturally rich, central part of Stockholm.

The property market in Östermalm is characterized by both resale properties and new developments. Resale properties, especially those in historic buildings, are highly sought after for their unique architectural features and sense of history.

New developments, while less common due to the district's established nature, are also in demand, especially those that offer modern amenities and designs while respecting the area's traditional aesthetic.

The price range for properties in Östermalm varies significantly based on factors like size, location, and the property's age and condition. Prices per square meter can range from relatively high to exceptionally high, reflecting the area's status as one of Stockholm's most exclusive neighborhoods.

For example, you might find properties ranging from around 100,000 SEK per square meter to much higher prices for luxury or uniquely desirable properties.

Over recent years, property values in Östermalm have generally shown an upward trend. This increase is due to several factors, including the district's enduring appeal, the limited supply of properties, and the general market trends in Stockholm.

However, it's important to note that real estate markets can fluctuate, and past trends are not always indicative of future performance.

Looking at future developments and city planning changes, certain projects could impact property values in Östermalm. For instance, any major infrastructure developments, urban renewal projects, or changes in local amenities can affect property desirability and, consequently, their values.

Specific names of upcoming projects might not be well-known, but monitoring Stockholm's city planning initiatives is advisable for potential buyers.

Predicting the real estate market in Östermalm in the coming years involves considering various factors, including economic conditions, housing demand, and any changes in local policies or development plans.

Given Östermalm's status as a prime location, there's potential for continued demand and value appreciation, particularly for properties that offer something unique, whether in terms of location, historical significance, or luxury features.

Factors indicating a potential increase in value include the ongoing appeal of living in a central, well-established area, the limited availability of new properties, and the general trend towards urban living in well-connected, culturally rich neighborhoods.

Additionally, if Stockholm's economy and population continue to grow, demand in prestigious areas like Östermalm is likely to remain strong.

Where is the best area to buy a property in Östermalm?

When considering the best area to buy a property in Östermalm, it's important to recognize that different parts of this district offer varied atmospheres, property types, and pricing.

Östermalm, known for its elegance and exclusivity, encompasses areas that range from bustling urban streets to more tranquil, residential zones.

One of the most prestigious parts of Östermalm is around Strandvägen. This area is famed for its magnificent waterfront views and splendid turn-of-the-century buildings. Properties here are typically high-end apartments, often spacious and with historical features.

The atmosphere is distinctly upscale, and the proximity to both the water and the inner city makes it highly desirable. However, the prices in this area reflect its exclusivity, being among the highest in Östermalm.

Another notable area is around Karlaplan, which offers a slightly different vibe. This part of Östermalm is known for its circular park and fountain, around which are apartment buildings that often feature more modern amenities.

The area is family-friendly and slightly more relaxed than the more central parts of Östermalm, yet still retains an air of exclusivity.

In terms of up-and-coming areas within Östermalm, it's worth paying attention to the neighborhoods around Gärdet. While traditionally seen as more of a standard residential area, it has been gaining popularity due to its more spacious environments and proximity to green spaces like Gärdet and the Royal National City Park.

The properties here can offer better value for money while still providing the benefits of an Östermalm address.

For those looking to buy property, areas such as Nybrogatan or around Stureplan are also worth considering. These areas are at the heart of Östermalm's social scene, with numerous restaurants, boutiques, and galleries.

Living here means being in the thick of Östermalm's vibrant urban life. The properties tend to be luxurious, with a mix of old-world charm and modern amenities.

On the contrary, certain parts of Östermalm might be less advisable for some buyers. Areas closer to the main roads can be noisier and less intimate, potentially detracting from the exclusive and tranquil living experience that many seek in Östermalm.

Furthermore, properties that are closer to nightlife spots, while exciting for some, might not be ideal for those seeking peace and quiet.

Here is a summary table to help you visualize better. If you need more detailed data and information, please check our property pack for Sweden.

Area	Atmosphere	Property Types	Notable Features	Price Range
Strandvägen	Upscale, Waterfront	High-end Apartments	Waterfront views, Historical buildings	Highest
Karlaplan	Family-friendly, Relaxed	Modern Apartments	Central park and fountain, Modern amenities	High
Gärdet	Emerging, Spacious	Various Residential Properties	Proximity to green spaces, Spacious environments	Moderate to High
Nybrogatan / Stureplan	Vibrant, Urban	Luxurious Apartments	Social scene, Restaurants, and Boutiques	Very High
Main Roads / Nightlife Spots	Noisy, Less Intimate	Varied	Close to nightlife, More urban bustle	Varies

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Is there a strong rental demand in Östermalm?

In Östermalm there is indeed a strong demand for rental properties. This demand can be attributed to the district's prestigious status, its central location, and the high quality of life it offers.

When considering the rental market in Östermalm, it's important to differentiate between short-term and long-term rentals, as each caters to a different demographic.

Short-term rentals in Östermalm are quite popular, particularly among tourists, business travelers, and expats on temporary assignments. These renters are typically looking for furnished apartments that offer convenience and a taste of luxury living in Stockholm.

They prefer locations close to the city center, such as areas around Stureplan or near Strandvägen, where they can enjoy easy access to restaurants, shops, and cultural attractions.

Long-term rentals, on the other hand, attract a different group. This includes professionals working in Stockholm, expats on longer assignments, and sometimes local residents. These tenants often seek unfurnished or partially furnished apartments that they can personalize over time.

They tend to prioritize spacious, modern apartments or those with historical charm, depending on their personal preferences.

Areas like Karlaplan, which offer a more residential atmosphere while still being close to the city center, are particularly appealing for long-term renters.

The profiles of potential tenants in Östermalm are diverse. They range from high-earning professionals and diplomats to affluent students and expats. These tenants are typically looking for properties that offer a blend of comfort, style, and convenience.

Properties with modern amenities like updated kitchens and bathrooms, in-unit laundry facilities, and high-speed internet are particularly attractive.

Additionally, features like balconies, parking facilities, and proximity to public transportation can significantly reduce vacancy rates.

When it comes to the potential returns on investment for rental properties in Östermalm, they can be quite favorable. It's important to note that the high acquisition costs in Östermalm mean that initial yields might be lower compared to other areas.

Despite this, the strong demand and prestigious nature of the district can lead to stable rental income and potential capital appreciation over time.

Estimates of returns vary, but rental properties in Östermalm can command premium rates, especially if they are well-maintained and located in sought-after parts of the district.

Currently, there is an increasing demand for properties that offer a balance between modern amenities and historical charm. Apartments in well-maintained older buildings that have been updated with contemporary conveniences tend to be especially popular.

Such properties not only cater to the aesthetic preferences of many renters in Östermalm but also offer the comfort and functionality that modern tenants demand.

As a result, these types of properties could potentially provide better yields in the long run, thanks to their unique appeal in a competitive rental market.

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Is it easy to buy a property as foreigner in Östermalm?

Before we answer the question, please know that we have an article dedicated to the experience of buying real estate as a foreigner in Sweden.

Buying property in Östermalm, Stockholm as a foreigner is relatively straightforward, but it's important to understand the nuances of the local real estate market and the specific considerations that apply to foreign buyers.

Firstly, Sweden does not impose any significant restrictions on foreign buyers. This means that, in theory, buying property in Östermalm is as accessible to foreigners as it is to Swedish citizens. The process and the market dynamics can be quite unique.

The purchasing process in Östermalm, like the rest of Sweden, is efficient but can be competitive, especially for sought-after properties.

It typically involves viewing properties, placing a bid, and, once the bid is accepted, signing a contract and paying a deposit. The balance is usually paid on the date of possession.

One unique aspect of the Swedish property market is the ‘bidding war’ - it's common for properties, especially in high-demand areas like Östermalm, to receive multiple offers, often pushing the final sale price above the asking price.

When it comes to risks associated with property investment in Östermalm, the primary considerations are the high purchase prices and the potential for market fluctuations. Östermalm is one of Stockholm's most expensive areas, and while properties here can be a good investment, they require a significant upfront capital.

Additionally, as with any property market, there is the risk of economic factors affecting property values.

A classic pitfall for foreign buyers in Sweden is not being familiar with the local market dynamics. For instance, understanding the importance of being quick in making decisions due to the fast-paced nature of the market is crucial.

Another specific aspect is the ‘överlåtelseavtal’ (transfer agreement), which is a key legal document in the property transaction. Misunderstanding the terms of this agreement can lead to complications.

Working with a local real estate agent or lawyer is highly advisable, especially for those unfamiliar with the Swedish language and local real estate practices.

They can provide valuable insights into the market, assist in navigating the legal aspects of the purchase, and help avoid common pitfalls. They can also be instrumental in negotiating and ensuring that the transaction adheres to all legal requirements.

Common exit strategies for property investors in Östermalm include renting out the property, which can be lucrative given the high demand for rentals in the area, or reselling the property, potentially after renovating or upgrading it to increase its value.

Given the prestigious nature of Östermalm, properties here can hold their value well, making them a solid investment for those looking to resell in the future.