On Wednesday, Storebrand had invited a debate in Arendalsuka about the housing market, rising interest rates and growing inequality. The first interest rate increase will come today. Chief economist Harald Magnus Andreassen at SpareBank 1 Markets was fully aware that Norges Bank will raise the rate from 3.75 per cent to 4 per cent on Thursday at 10 am.
In June, Norges Bank signaled another increase in September. But Andreassen is now asking the central bank to be careful going forward. He believes an interest rate of 4 per cent is far preferable to an increase to 4.50 per cent.
– The reason is very simple. Norges Bank has increased the interest rate by 1 percentage point from May to August. We have yet to see the effects of these increases. In contrast, we have seen a fairly strong effect of the previous interest rate increases. With such a large debt as Norwegians have, it will result in a significant reduction in income for many, warned Andreassen.
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No major housing shortage
He has previously warned against a sharp fall in house prices. The prediction in 2017 was a decrease of up to 40 percent. Households’ large debt is the concern.
– The surest way for countries to become poorer is for housing prices to rise. It makes people think they are getting richer, and then they borrow more. Norwegian households have more debt than any other in relation to their income, said Andreassen.
He railed against the low interest rates we have had since the financial crisis almost 15 years ago. According to Andreassen, this is the main reason for the increased house prices.
– There is no massive housing shortage in Norway. Rents adjusted for price growth are the same today as they were ten years ago. If we look at the rental prices, house prices must fall sharply. You are no longer allowed to borrow money for free. Why have house prices risen more than rents? Because Norway got a low interest rate without us needing it.
– It is not a housing shortage that has pushed up prices, it is the availability of loans. The fact that interest rates have been too low is by no means a complete disaster. But without the lending regulations had this gone completely wrong for Norwegian consumers, thundered the chief economist.
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Historically high price growth
Chief economist Kari Due Andresen at commercial broker Akershus Eiendom believes there is a high probability that Norges Bank will rather take in too much than too little.
– But in the 20 years we have had, the price increase has not been as high as it is now. If we do not see a clearer price drop for services, which is largely driven by wage growth, Norges Bank will raise interest rates more.
– Then we will see mortgage interest rates well up in the 5s, perhaps over 6 per cent, she warned. Handelsbanken’s former chief economist predicts an interest rate increase on Thursday, one in September and perhaps another in December. In that case, the key interest rate at the end of the year is up to 4.5 per cent,
She did not agree with Andreassen that Norway has had a much lower interest rate than we have needed.
No free interest rate setting
– Norges Bank manages its interest rate policy according to price growth and employment. The reason for the low interest rates is that Norway has a small and open economy. Then we cannot set the interest rate freely, said Due-Andresen.
The interest rate is called the atomic button in the housing market. But the chief economist was clear that too few homes have been built in Oslo over time. This causes prices to rise a lot. Far too few new homes are built. The chief economist fears that when demand picks up again, prices will rise more than they should..
– There will be too many people fighting for the same home. The municipality is unable to regulate itself away from the low initiation. Demand can be turned on and off overnight, but on the supply side things are much slower, said Due-Andresen.
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The interest rates have not done the job
CEO Sverre Molvik of Selvaag Bolig pointed out that house prices in Oslo so far this year have risen by approx. 7 percent. This has happened despite higher interest rates.
– The price increase is driven by a low supply, and supply and demand govern everything. The low supply means that the interest rate has not done what it usually does to bring house prices down, said Molvik.
He claimed that retail prices in many places are now so low that they are unable to take on new projects. This causes housing construction to plummet.
– Construction costs must therefore come down, and that is happening now. The contractors and subcontractors have nothing to do. But I am not afraid that house prices will fall, because many people want to move to the cities, said the Selvaag boss.
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Passive from Støre
Managing director Carl O Geving of the Norwegian Estate Agents’ Association was also not too afraid of house prices going forward.
– I am not worried about the second-hand housing market at all, but the sale of new housing and a very passive housing policy from the government. Then the interest rate hits much harder. The government is completely absent. Støre went to the election with housing policy at the top, but too much is left to the municipalities, Geving claimed about the lack of regulation.
He also fears that we may get a rather dramatic increase in rental prices. Geving pointed to the highest population growth in a couple of decades. Many Ukrainian refugees have to go into the rental market, and labor immigration has picked up again.
2023-08-17 06:04:24
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