Real estate price reports from March in northern countries like Denmark and Sweden now show negative developments for the first time in over 10 years. If furloughed workers continue into unemployment, the effects on the housing markets will be even more significant, says Claudia Wörmann at SBAB Bank.
Spring Real Estate Price Increase, Trend Broken
Inhabitants of the northern countries of Finland, Sweden, Norway and Denmark have gotten used to very low interest rates and constantly increasing real estate prices. In Sweden, interest rates were dipping into negative territories and in Denmark, famously some homeowners have been offered payments for taking out a mortgage (negative interest rates).
Normally, homeowners in these regions see price increases each spring but this year the trend is broken and prices of apartments, houses and land plots have instead decreased a few percentage points. The change is large compared to the regular price increases. The development is worrying many citizens and has slowed the pace of sales to a virtual halt in April.
In Denmark, prices have decreased in seven out of 10 regions, including in Copenhagen where prices fell around 1.5% in March, according to Birgit Daetz, communications officer at housing watch outlet Boligsiden. She continued:
The real estate season normally starts in March and that means increasing prices. This year that hasn’t happened and due to the health crisis we expect prices in Copenhagen to continue to fall in the coming months.
Swedish Real Estate Statistics Agency Mäklarstatistik concurred with the Danes’ outlook and reported a drop in the number of sales in Sweden. During the last two weeks of March, the number of sales dropped more than 15% and continued on a downward trend into April.
Norway’s stats look almost the same and in Finland, prices fell slightly in most regions. Real Estate Norway reported single-digit decreases in prices last month, with an average decrease of 1.4%.
Banks Must Continue to Provide Financing
Since the start of the coronavirus crisis, the Swedish government and central bank have been starting up the printing presses and made over 100 billion Swedish kronor available to the banks. Government parties are now suggesting printing more than 100 billion kronor ($12 billion) per month. Even with falling prices, the question is if this unprecedented money printing will later result in increased inflation, and possibly a Cantillon effect on housing prices — again leading to higher nominal real estate values while at the same time devaluing currencies like the dollar or the Danish krone due to the increase in money supply.
“What is important now is that banks continue to provide intermediate financing,” Real Estate Norway CEO Henning Lauridsen said. He continued:
Experience from the financial crisis shows that a change in the dynamics of buying first and selling afterwards is counterproductive and destructive to the housing market. Although a more restrictive credit policy may seem rational to the individual bank, this collective is irrational.
The capital city of Stockholm saw the biggest price falls by an average of minus 1.7%. Real estate in cities in the Nordic regions lost more on average than in the countryside.
To counteract the slowdown in sales and the falling prices, governments in the region abruptly changed many rules and regulations pertaining to mortgages. From last week, citizens in Sweden can skip their mortgage payments until further notice. Similar actions are either underway or being discussed in neighboring Nordic countries, where politicians hope to boost the price of their real estate holdings.
What do you think? Let us know in the comments section below.
Pundits globally are flabbergasted Swedes still go to cafés, to restaurants and to hang out in parks without face masks on. The Coronavirus in Sweden has so far claimed 611 deaths, with 7,849 confirmed cases. Swedish people still send their kids to school and are not hoarding much of anything compared to countries like the U.S. But just like in most of the world many businesses are hit hard, and the country’s central bank has started the printing presses.
The Swedish Central Bank Has Started The Printing Presses
The Swedish Central Bank, the oldest-running operation of its kind in the world, called “Riksbanken” has predictably responded to the crisis by starting the printing presses. They’ve promised the banks a 500 billion SEK ($55B) credit line to “grease” the wheels, making sure there is enough liquidity in the system. Riksbanken’s chief Stefan Ingves has also stated that there are no limits to how much these presses can print, while carefully avoiding the term QE, or quantitative easing. Ingves has also previously stated at a press conference last month:
The Riksbank stands ready to do more if and when necessary to help the Swedish economy get through this crisis as well.
Citing liquidity problems on the financial markets, the Swedish central bank is now planning to buy government, corporate and mortgage bonds, and is auctioning USD denominated loans for around $70 billion. Riksbanken has already increased its government bond-buying target by $30 billion, after leaving their most important interest rate, the overnight repurchase rate, at zero percent.
Swedes Don’t Let The Recently Elected Leader Call All The Shots
One of the explanations for the Swedish approach to lockdowns is it’s rather unique governance system. Swedes don’t let the recently elected political leader call all the shots; here the local authorities are actually in charge. Or at least that is the design of the Swedish system, and Sweden’s unique response to the coronavirus pandemic may be viewed in this light. It’s a form of democracy comparable to the systems in Finland and Switzerland, where the state apparatus has also aimed for the decentralization of power for centuries. In contrast to the never-ending stream of decrees from “strong leaders” like Trump or Erdogan – and their citizens’ (apparent?) quick obedience – in Sweden the centuries-old authorities often have a larger say in how things should progress than the prime minister, and its people actually listen.
Consequently, the Swedish public has followed closely along to the Swedish health authorities’ daily TV broadcasted explanations on which measures might be effective; washing hands is, physical distancing as well, wearing masks maybe not so much. Protecting the risk groups is a priority, but schools, workplaces, and restaurants stay open for all else – albeit not crowded, and with new safety routines to avoid spreading the virus. This approach may be summed up by the unique Swedish word “lagom”, which means something similar to “just right”, or “not too much, not too little”. Lately, though reports of spreading covid-19 infections have been seeping out from many elderly homes in Sweden. A daily updated map on the number of cases and deaths in Sweden can be found here.
The Swedish “Lagom” Measures Will Be Analyzed in Great Detail
In the aftermath and analysis phase of the coronavirus pandemic, the Swedish responses to the coronavirus and the results from those “lagom” actions taken will be analyzed in great detail. Still today, April 7, many cafés, restaurants, and shops stay open even in the most afflicted areas of the capital city of Stockholm.
The nordic confidence in the established authorities culls Swedish elected politicians urge to decree “tough” measures like a “lock-down”. They are not afraid their popularity ratings will fall if they do not act “tough”, as few Swedes find the “tough” authoritarian leader attractive. The prime minister is temporary, but the central bank and the Swedish Health Authority are persistent organizations, the former in operation since the 15th century.
The country is also one of the world’s most secularized societies with the least religious folks in the world, turning to science rather than faith when combating covid-19. The Swedish Health Authority Folkhälsomyndigheten (FHM) reigns supreme. Swedish politicians can avoid some of the responsibilities of “knowing best”, and can defer decisions on rules for social distancing and public transport, among other things.
The Swedish prime minister Stefan Löfven often refers to letting “the experts” steer, instead of having himself prognosticating the future and deciding on actions to counter-act a never-before-seen virus.
Swedish Central Bank Testing It’s Own Digital E-Coin
In the meantime, while the coronavirus has reached at least one employee at the bank, the Swedish central bank is testing its own digital dollar, the “e-krona”. When asked about the project it’s chief Stefan Ingves has repeatedly told journalists that “Bitcoin is not money”, but that a digital dollar is needed to keep up with the times.
By introducing its own electronic currency and moving away from paper cash the central bank could actually continue lowering the interest rate into negative territories. Sweden is already maybe the world’s most cashless society. When few have access to actual cash – few can benefit from those negative interest rates by hoarding cash under the mattress. The beneficiaries of some loans will reverse – the lender will have to pay, while the beneficiary of the loan will receive extra interest from taking out a loan. Already in Germany people are paying to lock-up cash in 30-year government bonds, and in Denmark negative interest rate mortgages have been introduced. Where these strange actions will take the economy is hard to say. Is this whole process, in the end, giving the central bank a new tool to “reverse-inflate” away loans?
The reactions to the Covid-19 pandemic by politicians and their central bankers may lead to disastrous effects on the economy long-term, as politicians print way too much currency trying to fix the current slow-down, inadvertently inflating away people’s savings and paychecks over the longer-term. Printing paper cash or the equivalence in electronic cash (creating debt) is not the same as “creating money”, as currency isn’t money. Gold is money, however, as is bitcoin. Keynesian central bankers are now hoarding gold, while Austrian libertarians and anarchists are hoarding bitcoin. The future will tell who was right.
What do you think about the Swedish “lagom” approach to the pandemic? Let us know in the comments below.
Sweden’s Financial Supervisory Authority (FSA), ’Finansinspektionen’, has fined Swedbank a record sum of 4 billion Swedish krona ($386M) for breaching anti-money laundering regulations on a large scale. Around $5.8 billion had been funneled between suspected accounts in Swedbank and Danske Bank in the Baltics, the latter already fined large amounts for previous money-laundering activities.
Swedbank Kept Separate Books To Help With Money-Laundering
After Swedish public service television SVT had looked closer at Swedbank’s operations in Estonia, the inspection revealed a large number of suspicious transactions. These discrepancies prompted the Swedish FSA to start investigations into the findings. Closer scrutiny found the bank had hidden identification details on bank account holders, going so far as to keeping separate books on clients – one official, and one ’under the table,’ to help facilitate money-laundering and tax evasion.
The bank also failed to act to prevent illicit transactions and money-laundering on a large scale, according to the investigations which caused the FSA’s motivation to sanction the bank 4 billion Swedish krona ($386m). The report on Swedbank’s misbehavior found more than 1,000 clients with Swedbank-accounts in the Baltics, but with addresses in high-risk jurisdictions such as The British Virgin Islands and Belize. When examined closer, the companies registered in such jurisdictions often lacked documentation or annual reports, or had published fake financial statements. Other names found in the client list belonged to well-known high-risk individuals.
The investigations have had other more far-reaching implications; it was found that a number of the transactions facilitated by the bank helped former Ukraine president Viktor Yanukovych, who was convicted for treason in 2019 and transferred millions in funds into his personal bank accounts. Other transactions were connected with Russian oligarch Iskander Makhdumov, who is associated with organized crime.
Transactions From Swedbank Linked to Most Extensive Tax Fraud in Russian History
The findings also linked transactions from Swedbank to the most extensive tax fraud in Russian history, exposed by accountant Sergei Magnitsky, who paid for his revelations with the ultimate price; death. 50 accounts in Swedbank received a total of $26 million USD from the tax fraud. The money was transferred via companies suspected of money laundering in the highly publicized scandal in Danske Bank.
Swedbank is also under investigation in the U.S., as they operate an office in New York and deal in U.S. dollars. After being exposed, an investigation was conducted for Swedbank by the independent law firm Clifford Chance in London. It found that €36.7 billion in transactions, all carrying a high risk for money laundering, were processed through the bank’s branch network. The report also said Swedbank actively targeted high-risk customers from Russia and former Soviet states. The bank may face even larger fines than dealt with by the Swedish FSA when U.S. investigations are concluded. The bank’s stock price has tanked more than 30% since the money-laundering disclosures were published.
Money-laundering is generally helped by our current fiat money system’s opaque characteristics, which also affords most commercial banks the magical ability to create new money out of thin air, when lending, also inflating our base currency. If banks, and by association also governments, were forced to use a transparent blockchain and fixed supply money system they’d have a much harder time hiding illicit transactions and inflate our currency.
Do you agree with us that Bitcoin is better than banks? Let us know in the comment section below.