Sweden’s finance minister Magdalena Andersson has confirmed that owners of residential property in the northern Swedish town of Kiruna will be able to sell their properties without paying tax on gains made because of the impact of the town being, literally, put on trailers and moved.
Kiruna sits on top of one of Europe’s biggest deposits of iron ore, but following decades of mining, parts of the town have become undermined, and the government previously announced that it would be shifting its centre some 3km further east to reduce the risk of buildings being damaged or swallowed up by sink holes. The ground has been shifting because of the nature of the mining that occurs: it is done using explosives underground rather than being an open mine; older open seams have been filled in by rock falls underground, but this has affected the surface.
The government approved a plan in 2008 to redraw the railway around the town, and in 2011 the local municipality finalised the plan to shift the town to its new location.
The decision by Andersson to now alleviate the tax burden on inhabitants may prove controversial. The country’s financial regulator, Finansinspektionen, recently outlined plans to force home owners to increase the level of amortisation on debt, amid concerns that household debt has reached systemically critical levels (see article link below).
It also raises a challenge to collective investments in Swedish property in terms of assessing valuations, as it opens a chink in what is supposed to be consistent fiscal policy regarding property as an asset class. Swedish residential property has been a strong asset class in recent years in terms of returns, although data from the past couple of months suggests that prices of assets such as residential units (flats) in the capital Stockholm have seen price weakening.
Evidence of the impact is seen in funds too. For example, the Odin Eiendom fund, which is heavily invested in Swedish property companies, reported a negative return of -0.78% to the end of October, although year to date on that basis it reported return of 12.64%.