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HOUSING

Swedish banks ‘a safe haven’ from euro crisis

Swedish and Norwegian banks say they have seen an influx of foreign investors looking for a safe haven from the turmoil of the troubled eurozone.

Swedish banks 'a safe haven' from euro crisis

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.

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MONEY

What happens if you don’t pay a bill in Sweden?

Sweden's Enforcement Authority is responsible for collecting unpaid debts, fines, and declarations of bankruptcy. So, what happens if an unpaid bill reaches the Enforcement Authority, and can you do anything if you have a black mark on your record?

What happens if you don't pay a bill in Sweden?

What happens when you have a bill?

Usually, if you have a bill in Sweden, you will receive an invoice (faktura) either digitally or via post, which will include details such as the amount owed, who to pay and the date payment is due (förfallodatum).

If you don’t pay the invoice in time, the person you owe money to may turn the case over to inkasso, or a debt collection agency, who will again send you an invoice for payment, plus the agency’s fee.

If this invoice goes unpaid, the Enforcement Authority will get involved.

The Swedish Enforcement Authority, Kronofogden in Swedish, is responsible for collecting unpaid debts. It does this by providing advice and support to those who are unable to pay their debts, as well as helping creditors – such as, for example, landlords whose tenants have not paid their rent.

The debt collection agency will pass unpaid bills on to them, and you may receive a betalningsanmärkning or black mark on your credit record.

Before you receive a black mark, however, you will first receive an ansökan om betalningsföreläggande from the Enforcement Authority. If you pay this in time, your debt will not be registered as a betalningsanmärkning.

There are some types of payment where you can receive a betalningsanmärkning without the bill going through a debt collection agency first. These are usually payments owed to the state, such as unpaid tax, unpaid student loan repayments or unpaid municipal parking fees.

You are unlikely to come into contact with the Enforcement Authority unless you miss or forget to pay a bill.

What happens if you get a black mark?

A black mark can have pretty major consequences – it can stop you from hiring a car, getting a credit card, borrowing money (including getting a mortgage), taking out a phone contract or even renting an apartment, as well as barring you from ordering anything on credit or paying via invoice.

This is due to the fact that whenever you apply for a loan or credit in Sweden, the lender will check your credit score (kreditupplysning) to see if there is any risk of you not paying up. Many lenders have a strict policy on not lending to individuals with black marks on their credit score to minimise risk, no matter whether the mark is due to an unpaid phone bill or a missed mortgage repayment.

How can I check if I have one?

You can check if you have a black mark by contacting a credit check company – here is a list of all credit check companies in Sweden. Some may charge a small fee for the service, whereas others offer it for free.

One advantage of checking your own credit score before contacting a lender is that your credit score is not affected when you carry out a check on yourself. 

If, however, a bank carries out a credit check on you, this can affect your credit score – it’s usually not an issue if you carry out one or two checks, but a lot of checks in a short period of time could cause issues.

Can you do anything to remove it?

Unfortunately, no. 

All you can do is wait – a black mark will disappear from your record after three years for private individuals or five years for businesses. 

The best strategy is to avoid getting a black mark on your record in the first place – such as by paying your bills via autogiro (direct debit), keeping an eye on your post (as well as your digital post), and paying for items up-front if possible to avoid invoices, rather than using “buy now, pay later” credit services such as Klarna or Clearpay.

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