Macroeconomics
House prices in Oslo have increased more than in the big cities like Sydney, Toronto and London last year.
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We are a few notches more concerned about the higher house prices are going. Especially when the growth in house prices is increasing and at a very high level, so it has been until the last few months, ” says governor Øystein Olsen.
at the same time, debt growth was ticking further up slightly. Thus, we will become a few notches more concerned about, ” says Olsen.
the Graphs below shows that the high growth in house prices is far from unique to the Uk. House prices in Sweden and råvareeksportørene Australia and Canada also fell little during the financial crisis, and has risen sharply in the years that followed.
however, What is special for Norway is the strong growth in the last year. Although cities such as Stockholm, Sydney and Toronto have had higher growth in house prices since 2007, Oslo has had the highest growth in the last year.
In november were the prices in the capital around 22 per cent higher than the same month the year before.
Weighing the positive and negative sides
Thursday was the key policy rate kept unchanged at 0.5 per cent. The governor notified at the same time that it takes a lot for that the interest rate is lower.
Strong rise in house prices and high debt in the household sector means that he will be very careful not to cut the interest rate further ahead.
Olsen is not the slightest doubt that lower interest rates will stimulate further growth in house prices. But a brennhett housing market need not more by to the fire.
Olsen is, however, far less sure how much effect even a interest rate cuts will provide in those parts of the economy that actually have a need for more stimulus.
Given the uncertainty, there is reason to go cautiously forward, he says.
– One desires not too strong stimulus through the household sector and the housing market. We must weigh the negative aspects of low interest rates against the positive, ” he says.
– Much farther away from cutting interest rates
Just how worried the central bank is of the strong boligprisveksten and the danger it creates for the financial imbalances, evident in the central bank’s new forecast for renteutviklingen forward, the so-called rentebanen.
chief economist Frank Jullum and his colleagues in the Danske Bank points out that the central bank for the first time has added to the risk of financial instability directly into rentebanen.
Jullum believes the introduction of the new factor shows that Norges Bank does not want to signal further easing in rentepolitikken, even if it is in rentebanen is added into a probability of 40 per cent for a further cut in the key rate.
in our view, should kuttsannsynligheten which is built into rentebanen be interpreted as an insurance premium against an unwanted strengthening of the crown and/or a marked weakening of the economic key figures, type Jullum in an update this week.
Economists at Nordea Markets also points out that the new factor in the rentebanen shows that the central bank is very concerned about developments in the housing market.
– This provides kuttilbøyeligheten in rentebanen very little credibility. Norges Bank is much farther away from cutting interest rates than rentebanen indicates, type meglerhusets economists in an update this week.
Financial imbalances
higher and higher house prices are dragging with them lånevekst up. In October credit growth to 6.3 per cent in the past 12 months. Household borrowing is growing thus faster than revenue.
the central Bank thinks this is signs that financial imbalances are building up.
“The high boligprisveksten, contributing to higher borrowing in the household sector. It makes some households more vulnerable and increases the risk of an abrupt decline in demand and loan losses, banks ‘forward in time’, called the monetary policy report, Norges Bank, put forward in connection with the rentebeskjeden Thursday.
Olsen points out that the loss increases if house prices only continue to rise.
It can get a powerful reaction. A powerful reaction in house prices, many households could struggle with, given the låneopptakene they have. The concern increases the higher house prices will come, ” says Øystein Olsen.
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