Weak krona is 'mixed blessing' for expats
The Local · 13 Feb 2015, 16:29
Published: 13 Feb 2015 16:29 GMT+01:00
Sweden’s central bank’s decision to cut key interest rates to record levels earlier this week saw the krona drop sharply against international currencies, with as many as 9.6835 kronor required to buy a single euro.
"The krona is not extremely weak, but it is about seven to eight percent weaker than average. The development has been one of the worse in Europe and the krona has been one of the biggest losers, if not the biggest," said Carl Hammer, head of currency research at Swedish bank SEB told The Local.
“We’re looking at historically weak levels, especially if you’re British or European. If you’re European we think the krona will get even weaker compared to the euro in the next six months, maybe even up to 10 kronor to the euro,” he said.
For foreign tourists, all this amounts to Christmas come early. Those shockingly expensive nights out in Sweden won’t seem to empty their pockets quite as quickly anymore.
But what exactly does it mean if you're a foreigner living in the Nordic nation or planning to move here? Should you start panicking? Transfer your savings? Lobby for a pay rise?
Here's a look at three key areas in which a weak krona could have a marked impact on foreigners living in Sweden.
Your kronor won't go as far if you hit the shops in New York. Photo: Mary Altaffar/TT
Salaries and savings
While this is the best time to invite all your friends to visit you in Sweden, if you're a foreigner drawing a salary in kronor, you'll find your money won’t go as far if you visit other Eurozone countries or the US as well as the UK, where there is an ever-strengthening pound.
For example, if you were lucky enough to be on an annual salary of around 500,000 kronor six months ago, this would have converted to more than £45,000, but is now worth around £38,000 ($59, 540 or 52, 212 euros).
Not only that, if you decide to move back home, any Swedish savings you've made might seem worryingly small. If you're a Brit or an American, you'll get around three quarters of the money you would have done if you'd cashed them in in your home country before last summer.
However, Swedbank’s financial analyst Arturo Arques’ best advice to cosmopolitan professionals working in Sweden is to just take a deep breath, keep calm and carry on.
“After 30 years in the finance business, if there is one thing I have learnt it’s that there is nothing that is as difficult to predict as currency. There are no tips. It’s what it is. You just have to swallow the bitter pill,” he said.
Arques points out it’s not all doom and gloom. If you are employed by an international company with your salary set in euros but paid out in kronor, you will find you’re better off. And for the entrepreneurial souls, this may just be the right time to start a business in Sweden.
“It’s cheaper to start a business. Say I come from Spain with my euros and want to start a restaurant in Sweden, I’ll just buy all the pans and pots with my euros.”
”And if you’re thinking of moving to Sweden, the last thing I would worry about is the currency. Do I want to move to Sweden? Is there a good job in store for me? Is the employer fair? Can I stand the climate? All of those questions are a lot more important. The currency goes up and down. I have worked abroad and I know people who have worked abroad and I’ve never met anyone who has let the currency determine where they choose to work.”
Foreign savings could help you afford a summer house in Sweden. Photo: Ulf Lundin/Image Bank Sweden
Realtor Pär Gunnarsson of one of Sweden’s leading estate agents, Fastighetsbyrån, told The Local that although the cheaper krona has sweetened the deal for foreign home buyers with savings in other currencies, this is by and large offset by rising property prices.
The decision to buy a home in Sweden should have little to do with the state of the country's currency, he said.
“Of course the cheaper it gets, the more attractive it is to buy property here. But many people want to invest in a home regardless. Rather, the cheaper krona means that you get more out of the pot of money you own.”
“We don’t have any indications of more people from abroad buying homes in Sweden, but if they have earned their money in a different currency they may be able to afford more expensive houses.”
However soaring property prices have created a tough market for most prospective house buyers. Earlier this month, The Local reported that house prices across Sweden went up by six percent in 2014.
The idyllic island of Gotland – popular among cosmopolitan buyers looking for a summer home – has taken the biggest hit with property prices increasing by 14 percent. And in the commuter region around Stockholm foreign workers have encountered price bumps of 11 or 12 percent.
Gunnarsson said: “You can divide foreign buyers into two groups. The ones looking to buy a holiday home, which are mainly Germans, Norwegians and some Britons, and the ones looking to settle down here, either permanently or temporarily for work.”
“How strong your purchasing power is depends very much on where you’re moving from. If you’re coming here from property markets in central London or New York, prices in Sweden are not going to affect you much, but if you’re moving from, say, rural Finland it may be a different story.”
“But one group we can identify as affected by the falling krona are those who have previously lived in Sweden and have left the country to then return. If they have spent their time away in an area where property prices have been climbing less sharply they might find it difficult to return to the property market here. But as with so much else, it depends entirely on where you have been.”
It's the cheapest time in years for visitors to book a ski trip to Sweden. Photo: Niclas Vestefjell/Image Bank Sweden
Tourists have already been getting busy booking holidays to Sweden, with the number of hotel nights in Sweden up by 7.4 percent in 2014.
And Peter Terpstra, tourism analyst at Tillväxtverket, the Swedish Agency for Economic and Regional Growth, said the figures are predicted to grow.
A surging pound sterling is worth 20 percent more against the krona than it was a year ago, making Sweden a bargain to visit for British tourists. But while foreign visitors may afford to spend their pounds, euros and dollars more than ever in Sweden, Terpstra puts the popularity of Sweden down to factors other than currency.
“Generally exchange rates as such have little impact on tourism. Actual price levels matter more, but it usually takes a good while for that to show any kind of effect,” he said.
“There are usually other kinds of explanations. Foreign travel is going up worldwide and as more people are trying to find new destinations, more of them come to Sweden. We're gaining a reputation as a tourist destination, which is completely new for us. But the more foreign tourists we get, the better we get at taking care of them, and as a result, the more of them will come.”
And as other parts of the world have been shaken by tumultuous events in the past few years, Sweden remains a relatively safe country to visit.
“Particularly Americans pay great attention to safety when they book their trips. I am fairly convinced that for example Paris will see fewer tourists after the attacks earlier this year and those travellers may choose to come to Sweden instead,” said Terpstra.