Investors See Scandinavia as Safe Haven from Euro Debt Crisis

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.

Stylish living in Sweden

Although it's just a two-hour flight away from the UK, very few Brits buy property in Sweden, and yet the country has much to offer as it has stunning scenery and great skiing. While the north of the country is sparsely populated, the southernmost part of Sweden is on the same latitude as Edinburgh and the cities of Gothenburg and Stockholm have lots of cultural entertainment and restaurants but yet remain relatively uncrowded.

Temperatures here can reach 30°C in the summer and the area attracts large numbers of Dutch, Germans and Norwegians who buy summer houses as holiday homes.

Prices in Sweden fell by around 10% to 15% in the aftermath of the global financial crisis, but as the government lowered the interest rates, prices have gradually climbed back to where they were at their peak.

Property prices are much lower outside the cities and towns and a lot of Swedes own a second home, or summer house which is little more than a log cabin.

These can cost as little as £25,000. Prices in Stockholm can vary as it is made up of separate villages which each have their own character. In the city centre most people live in apartments, and not surprisingly this is the most expensive area at around £6250 per square metre.

A family house close to the city centre will cost about £773,000, but you can halve this figure by moving slightly outside of the city. Swedes enjoy a very high standard of living, and there are good job opportunities here for people with good qualifications, but taxes are high.