DNB Markets is the Wednesday out with a new one every six months konjunkturrapport, “Economic prospects”.
In the chapter on the Norwegian economy, given house prices a lot of attention.
the investment firm estimates now, a rise in house prices of 9.0 per cent in 2017, falling to 1.0 per cent in 2018 and 2019, before it takes up to 3.0 percent in 2020.
In the previous konjunkturrapport was the estimate of 7.0 percent for 2017, and to 4.0 percent for 2018 and 3.0 percent for 2019.
Growth will slow down
- We expect that the boligprisveksten will decline through 2017. The high boligprisveksten we have behind us is in itself an argument for lower growth going forward because house prices have gone up at a high level. Another important argument is that interest rates no longer fall printer makroøkonom Jeanette Power Ebb and senior economist Kyrre Aamdal.
Although interest rates likely will remain low, is it historically mainly changes in interest rates that affect house prices. Most of the effects from lower interest rates is probably already taken out in the house, called it forth.
the Analysts further shows that a large part of household debt, even with very low interest rates, is bound up in the payment of interest and installments.
Without a further fall in the interest rate, it is thus limited in how much more household debt can rise. In addition, we expect low growth in household disposable income. Thus households with little room to finance even more expensive homes. It speaks for the lower rise in house prices ahead.
A third argument for the lower rise in house prices is, according to DNB Markets, that housing construction has taken up sharply.
It implies an increase in the supply of homes, which will probably give a lower rise in house prices from the latter half of 2017, the report.
the investment firm also points to the innstramningen of boliglånsforskriften, and especially the new requirement that the mortgage can’t exceed five times the gross income.
This comes as a supplement to the requirement that låntagere to withstand a rate increase of five percentage points.
- Requirement is expected to contribute to lower credit growth for households, but the effects are probably small in both credit growth and house prices. It is the households with the highest income, probably hardest hit by the requirement, thus it can be imagined that the more expensive boligobjekter will suffer the hardest. This kjøpegruppen can also believed to be active in leilighetsmarkedet through the purchase of sekundærboliger, write the analysts.
self-perpetuating?
DNB Markets will find it generally easy to estimate a negative sign of the effect of regulation on inflation, but we think it is more difficult to say something about how great it is.
- We expect no dramatic effect unless the requirements leads to a mood is altered in the households, is called.
the investment firm can, in fact, do not rule out the possibility that boligprisveksten has been self-reinforcing, that is to say that expectations of further rise in prices in itself pulls up the prices.
- There are signs that more investors have entered the housing market. The return of owning the property relative to other investment objects, however, see not seem to have increased if one looks away from the from the boligprisveksten. It can point in the direction of forventningsdrevet inflation. Ever-lower, and falling, omsetningstid can also be such a character, write the analysts.
Omsetningstiden, the number of days it takes from a housing to be placed on Find.now it is sold, was down in 12 days at the lowest.
A low omsetningstid implies that a good deal of likely to purchase the property before the ordinary view. The homes sold quickly, may indicate that buyers are afraid to miss home and have to buy more expensive later. When can it pay off to bid a little higher than the rate before the ordinary view. In this train of thought is just an expectation that house prices will rise further, continuing the DNB Markets.
the investment firm sees signs of such forventningsdrevet prices in Oslo.
- When can a optional. turnaround in the market is enhanced by the fact that the expectations turn. It will be able to influence developments in the rest of the economy. (…) The story also indicates that the periods with very high rise in house prices, often been followed by periods with a more pronounced decline, the report.
Nedsidescenariet
Analysts have therefore written a separate chapter about the effect of a swift turnaround in the housing market – a nedsidescenario, as well to highlight not their hovedscenario.
In this nedsidescenariet for the house operated with a fall of almost 20 per cent over the next four years.
A possible way to design a nedsidescenario with a fall in house prices is according to the analysts to assume that a shock triggers boligprisfallet.
- such A shock could be, for example, a renteoppgang or something that gave significantly higher unemployment and thus inntektsbortfall for households. Another possibility is to say that boligprisfallet in itself is the causative factor, it is called.
the DNBs model by others to a fall in house prices in 2017 at five percent.
- the Price is already now six per cent higher than the average for the previous year. Thus implies a fall of five per cent from last year, a marked turnaround. We then go from an increase in house prices on an average of one percent each month in 2016 to a fall of 1.5 percent in each month of the year. If one assumes that it improves a bit in 2018, with an average månedsvekst of minus 0.5 per cent, however the fall of 2018 around 10 percent, enter the investment firm.
The further the sketch is that falltakten declines through 2019 and that we are now experiencing zero growth in 2020.
Limits consumption
In the first place, will such a path for house prices frame private consumption and housing investment.
A fall in house prices will shrink household wealth and contribute to that savings increase from around nine per cent of income in 2016 and 12 percent in 2020. About two-thirds of the wealth of the household sector’s housing wealth, and thus, a fall in house prices have major effects on the total assets in the households, type of DNB Markets.
the investment firm estimates that such a fall in house prices will lead to a fall in housing investment of over 20 per cent through anslagsperioden.
Falling house prices 20 per cent, households with high belåningsgrad be sitting with negative equity.
Households with negative equity will probably not want to sell residence with a loss, which means that these households do not want to move. It limits the demand for housing, which can reinforce a fall in prices, but it also reduces the demand for consumer goods to the buyer in connection with the., write the analysts.
- Also, these households will probably increase their savings as a result of the reduction in housing wealth. It reduces consumption more generally, it is called on.
Weaker GDP-growth
Fall in consumption and boliginvesteringer will, according to DNB Markets provide lower overall demand, which affects large parts of the tjenesteinvesteringene negative a little farther forward.
- Lower demand, higher unemployment, and weaker wage growth, which amplifies the effect on the consumption. Other parts of the economy, such as petroleum investment, and parts of the fastlandsinvesteringene, are probably less affected. Also, a weaker exchange rate, which probably gives slightly higher exports, and a slightly more expansive fiscal policy, partly to counteract the negative effects of private domestic demand, the report.
Total estimate DNB Markets in this scenario, a GDP growth rate of just over one percent in 2017 and lower in 2018, before it picks up again in 2019 to 2020.
the Growth in the mainland economy is not negative, but significantly lower than in the hovedscenarioet, that predicts 1.3 percent GDP growth in 2017, 1.6 per cent in 2018, 2.0 per cent in 2019 and 2.1 per cent in 2020.
Cut the interest rate to zero
As a result of the weaker outlook for the Norwegian economy, and thus expectations of lower interest rates, assume the investment firm that the krone exchange rate depreciates from the current level.
The weaker krone exchange rate will send inflation higher, despite lower wage growth and lower margins.
” But will the inflation rate be below the inflation target of 2.5 per cent, while capacity utilization will be significantly lower than in the baseline scenario. It makes that the Norges Bank probably will put down the key rate, and we add to the reason that the
the key policy rate should be cut to zero percent, enter DNB Markets.
the Whole konjunkturrapporten can be found here.
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