Betting against Sweden's property market

Synopsis

Investors are increasingly concerned about the potential end of Sweden's decade-long property boom. From August to October, the country's residential property market experiences its fastest decline since 2008, causing the value of the Swedish krona to drop by 4.4 percent against the Euro since September. Home prices in Sweden have roughly doubled since 2008, surpassing similar markets in Canada and Australia. With household debt at 180 percent of disposable income, the situation raises alarms. The yield on commercial property has plummeted from over 4% in 2007 to less than 1% today, according to the Riksbank. Investors consider shorting Swedish property through listed commercial property companies, such as Faberge, which has 80 percent of its assets in Stockholm offices. Despite a 226 percent rise in shares since 2012, the company's annual funds from operations have only increased by 7 percent, leading to concerns about overvaluation and negative free cash flow.