Investors are looking towards Scandinavia in the wake of the Euro debt crisis, but this area isn't immune from risk as some experts are predicting there could be a property bubble forming. Sweden is currently paying less than Germany to borrow for 10 years, and government bond yields in Norway are at a record low.
In spite of this Robert Shiller, who helped create the S & P/Case Shiller home price index feels both countries could be at risk of asset bubbles which could damage their economies, and is warning that policymakers should do more to protect their property and credit markets from imbalances.
House prices in Norway have doubled from 2001 to 2010, and the annual increase last month was a more than respectable 8.5%. Household debt is predicted to increase to 204% of disposable income this year which is the highest level since 1988.
According to the International Monetary Fund, homes in Sweden seem to be overvalued, making price falls likely. Values have tripled during the past 15 years, although house prices fell by 2% last quarter having reached a peak which resulted from tax cuts, low rates and a strong economy.
At the moment both Norway and Sweden may seem to have little to worry about as both have still retained their triple A rating, and the Swedish housing minister, Stefan Attefall doesn't appear concerned, feeling the boom is at least partially driven by a shortage of housing. Both countries are rated as being extremely low risk, with Norway offering the lowest risk while Sweden is the third lowest after the US.
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