• Sweden edition
 
Swedish banks 'a safe haven' from euro crisis

Swedish banks 'a safe haven' from euro crisis

Published: 14 Oct 2012 17:42 GMT+02:00
Updated: 14 Oct 2012 17:42 GMT+02:00

But while financial institutions in the Scandinavian countries may be as safe as houses, frothy real estate markets have pushed consumer debt to record levels.

In Stockholm's trendy Vasastan district, a 10 square metre home once used to house the building's caretaker last month sold for 1.35 million kronor ($204,000).

For investors, the case for placing money in Sweden and Norway is largely based on the fact that their currencies are seen as less risky than the beleaguered euro. Neither country is a member of the eurozone, and Norway is not even a member of the EU.

Moreover, their export-driven economies have been doing well, their financial systems have been largely unscathed by the international crisis, and Norway's oil industry has been cheered by rising prices and a string of oil and gas finds over the past year.

At Norway's largest bank DNB, a special unit has been set up to deal with the growing number of inquiries from overseas.

"Over the past year we've seen growing interest from foreign clients not just in private banking but also from regular retail and corporate banking customers," said Ingrid Tjønneland, DNB's head of private banking, which targets high net worth individuals.

The trend began two years ago with a growing number of German investors depositing money in Norwegian banks, but has spread to investors from all over

the eurozone, she added.

A spokeperson for Scandinavia's largest bank Nordea said that although the phenomenon is more pronounced in Norway, some central banks have raised their

Swedish krona-denominated holdings in the wake of the euro crisis.

"We're seeing large inflows into (Norwegian and Swedish) fixed income funds," said Claes Maahlen, head of trading strategy at investment bank Handelsbanken Capital Markets.

Anatoli Annenkov, an economist at Societe Generale in London, noted that the low trading volumes of Scandinavian currencies meant that they could be difficult to sell if there is another global shock to the financial system, but added that he remains "relatively positive" on Norway's krone and Sweden's krona.

While the financial crisis has seen banks in other countries tightening credit and consumers subsequently lowering their debt levels, the strong economies of Norway and Sweden have done little to stop a surge in property prices.

The Norwegian property market has risen by almost 25 percent in the past five years, making it the strongest performer in the industrialised world.

Perhaps unsurprisingly then, consumer debt has spiked. Swedish households' average debt as a share of their disposable income rose to almost 170 percent

last year. The Norwegian ratio crossed the 200 percent mark earlier this year.

Sky-high property prices are increasingly putting the squeeze on middle class families in the major cities.

Annika Borg, a 29-year old business intelligence consultant, told AFP that although she and her partner both work full time, they still can't afford a house with a garden in the Swedish capital.

Instead the couple recently settled for a two-bedroom apartment in a suburb ahead of having their first child, with the hope of one day getting a garden for their family as they move up the property ladder.

"That's our hope, but where that house would be located is another question," Borg said.

The high indebtedness of home owners makes them more vulnerable to any future rise in the interest rate.

"While household debt is at an all time high, interest costs are nearly at an all time low," said Shakeb Syed, chief economist at Norwegian stock broker Sparebank1 Markets.

On Wednesday, credit rating institute Moody's warned that Norwegian banks "are sensitive" to the housing market.

On the other side of the border, minutes from the latest meeting of the Swedish central bank show that four of its six policymakers were concerned with the level of household debt.

However, few believe the countries will see the type of real estate crash that in recent years has hit countries like Ireland, Spain and the United States.

Healthy government finances and low unemployment rates, especially in Norway, are underpinning the market.

Both countries also lack a crucial ingredient of most housing bubbles: An increase in the number of homes being built. For more than a decade, the supply of new housing in Norway and Sweden has trailed that of other European countries.

Critics point to onerous planning laws, high construction costs and a failure to invest in infrastructure in urban growth areas.

"Prices have risen the most in city centres. I think it would have been a good idea to expand the transportation network around the big cities," Syed of Sparebank1 Markets said.

AFP/The Local (news@thelocal.se)

Don't miss...X
Left Right

Your comments about this article

Today's headlines
Elections 2014
Reinfeldt better at handling a crisis: Poll

Reinfeldt better at handling a crisis: Poll

Prime Minister Fredrik Reinfeldt's hopes for remaining in office has been given a boost after more Swedes said they had greater faith in him handling a crisis compared to election rival Stefan Löfven. READ  

Gaza & Robin Williams: Swedes' Google habits
Actor Robin Williams. Photo: AP

Gaza & Robin Williams: Swedes' Google habits

The internet search giant has revealed what Swedes googled for most over the summer period with the top 10 made up of diverse search topics ranging from sport to wasp stings READ  

Dad jailed for assaulting his infant twin sons
Photo: Jessica Gow/TT

Dad jailed for assaulting his infant twin sons

A man in central Sweden was sentenced to prison for aggravated assault on Friday after doctors noticed that both his twin sons had sustained serious and unexplained injuries. READ  

Swedish city all set for six-hour workday trial
Clocking in. File photo: Shutterstock

Swedish city all set for six-hour workday trial

Officials finalized plans on Friday for the "Gothenburg guinea pigs" who will test out the six-hour workday, a move it's hoped will cut down on sick leave, boost efficiency, and ultimately save Sweden money. READ  

Armed royal guards caught drunk on the job
Photo: Gunnar Lundmark/TT

Armed royal guards caught drunk on the job

Three Swedish soldiers risk prison after they were found to be drunk while guarding Stockholm's Royal Palace. The men, who were all armed at the time, were charged on Friday. READ  

Stockholm
What do the Swedes do when summer's over?
Photo: Isabela Vrba

What do the Swedes do when summer's over?

The heatwave is well and truly over, the days are getting shorter, and winter is coming. With this in mind, The Local's Isabela Vrba chatted to ten Stockholmers about how they plan to tackle the autumn. READ  

Swedes spend fortune on nail polish trend
Photo: Bertil Ericson/TT

Swedes spend fortune on nail polish trend

Swedes are spending more than ever on makeup - and a growing chunk is going directly to their fingernails, new figures showed on Friday. READ  

Sweden mulls stripping paracetamol from shops
The pharmacy section of a grocery store. Photo: Fredrik Sandberg/TT

Sweden mulls stripping paracetamol from shops

After a drastic increase in the number of paracetamol poisonings in Sweden, authorities have said the drug should only be available in pharmacies. READ  

Listeria fears prompt meat recall in Sweden
File photo: Andreas Hagerman/Flickr

Listeria fears prompt meat recall in Sweden

After finding traces of listeria in ham sold in Sweden, food companies decided on Friday to recall several Danish cold cuts. READ  

Sweden Floods
More rain expected as floods hit day four
Photo: Johan Nilsson/TT

More rain expected as floods hit day four

UPDATED: Sweden's floods showed no signs of abating over Thursday night, with highways closed, emergency teams working overtime, and more rain on the way. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Politics
'Sweden Democrats hold the key to elections'
Society
Swedes celebrate first day of smelly fish season
Politics
Sweden elections: How do they work?
Finest.se
Gallery
People-watching August 20th
Society
Did you know the Bronx in NYC was named after a Swede?
Blog updates

17 August

Sea Fever (Around Sweden in a kayak) »

"I’m going to keep this post short and sweet as its not something I take any pleasure in writing. After much deliberation I have made the heartbreaking decision to abandon my trip after 1200km due to reoccurring injury. It is not a decision I have made lightly and it is one that has been truly devastating..." READ »

 

17 August

St. Louis strong (Blogweiser) »

"It’s typically a bad sign when my hometown makes news in Sweden. St. Louis was in the headlines here a few years ago when a tornado struck the airport. The city also caught attention after a politician talked about ‘legitimate rape’. Now, shooting and riots this week in Ferguson, a part of St. Louis, are..." READ »

 
 
 
Politics
"Iraq reminds me of the Yugoslav wars. It's the same story."
Society
Swedes slam Danes for 'racist' art
National
Majority of Swedes favour more or just as many refugees
Society
Lock your bathrooms: Swedish toilet invader on the the loose
Politics
'Assange will not leave until safe'
Gallery
See more images from the southern Sweden floods
Sponsored Article
Find out what gives this Swedish school executive appeal
Society
Serial chicken smuggler caught at Norway border. Again.
Society
This gold coin may be the key to solving a Swedish massacre
Shutterstock
Lifestyle
The Swedish mentor (and why you may need one)
Politics
Reinfeldt calls for tolerance to refugees
Gallery
People-watching August 16-17
National
Sweden celebrates 200 years of peace
Society
Top ten literal Swedish words
Politics
'Terror training should be illegal': Liberal Party
Gallery
Swedes talk about 200 years of national peace
Politics
Islamic extremist shakes Sweden with TV threat
National
Teacher fined for 'Hitler salute' in German class
Features
Kiruna residents talk life in a town on the move
Skatteverket
Sponsored Article
Introducing... ID cards and permits in Stockholm
Sponsored Article
Introducing...Your finances in Stockholm
Sponsored Article
Introducing...Housing in Stockholm
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

734
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
http://psdmedia.se