September 26, 2021

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DNB Markets: - Home price inflation is taking a rest

DNB Markets: – Home price inflation is taking a rest

On Thursday morning, DNB Markets’ Chief Economist Kjersti Haugland and her team of economists will present new financial forecasts.

In the report, the brokerage house points out several factors that may have contributed to the fact that inflation has been high over the past year.

  • Reducing the interest rate from 1.5 per cent to 0.0 per cent has reduced debt servicing costs and is perhaps one of the most important contributors to the demand side.
  • Changing preferences as a result of the lockdown have contributed to an increased desire to change the housing situation.
  • At the same time as interest rates were lowered, the supply of housing fell in the summer of last year. The decline in the housing supply and a sharp shift in demand is likely a contributing factor to the bidding rounds becoming more intense than usual during the summer and early fall of last year.
  • The higher prices at the start of the pandemic may have in itself contributed to more people wanting to invest, at the same time that sellers got better tips for participating in the bidding rounds.

‘Moderate inflation will continue’

DNB Markets notes that greater pressure from the demand side appears to be easing, and writes that this explains the more moderate price growth in the housing market since April.

“We don’t see any direction for this shift right away, and estimate that moderate price growth will continue throughout the fall. We also believe that interest rates will begin to rise during the second half of the year and limit the appetite for household buying in the future,” DNB Markets wrote in the report.

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Given the development of good income and improvement in the labor market, and the fact that the economy is generally doing well, DNB Markets does not expect the price level in the housing market to sharply adjust downward.

Expect moderate price growth over the next three years

The additional reopening is likely to contribute to a number of households experiencing less uncertainty about their finances, and beyond the short-term dynamics, there appears to be a fairly good balance between housing construction and population growth at the moment, according to DNB Markets.

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“Therefore, we assume that house price growth will take a respite in the second half of 2021, before we get moderate growth throughout the remainder of the forecast. This gives a 2021 growth of 8.5 percent in 2021 and 1.7 percent in 2022, before growth picks up to just over 2 percent in 2023 and 2024,” DNB Markets wrote in the report.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We want you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.