Significant declines in housing construction have led Eiendom Norge director Henning Lauridsen to draw comparisons to the financial crisis. Handelsbanken’s chief economist doesn’t believe the comparison.
Figures from NBBL show that the number of new homes being built is much lower than in the past.
The president of Eiendom Norge is worried and compares the situation to a financial crisis. He fears more bankruptcies, downsizing, and rising housing prices.
– In the new housing market, I have no problem saying that there is a crisis, says Henning Lauridsen.
During the financial crisis and the time after it, fewer homes were built than usual, he says. The banks had no money to lend.
– This led to a sharp decline in housing construction.
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It took two to three years before construction began again. But the consequences did not come until later.
The interest rate was raised due to the financial crisis, and between 2014 and 2016 the interest rate was reduced by about one percentage point.
People had more money to spend, but the housing supply was not large enough.
– Low interest rates have caused an explosion in house prices in Norway, says the head of Eiendom Norge.
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In one year, house prices rose by about 13 percent nationally in 2016. In Oslo, growth was 23 percent.
The rule of thumb is to increase rates by 10 percent after interest rates decrease by one percentage point. There’s something else at play here, Laurisen says, which is a severe supply deficit.
He explained that he does not believe that we will see a strong rise in house prices now as we did in 2016, but he still fears a similar impact.
Chief Economist Marius Gunsholt Hof at Handelsbanken tells E24 that he believes there are big differences between the period from the financial crisis to 2016, and the period we see today.
– In the past, the economy has faced negative surprises through lower interest rates and increased fiscal stimulus. This was possible because inflation was not a problem, Hof says.
We are now in a situation where interest rates are rising sharply to combat high inflation. The real economy suffers as a result.
Therefore, Hof believes that the clear difference from 2016 is interest rate expectations. In the interest rate market, there is no indication that central banks may cut interest rates before long, and the level of interest rates will remain higher.
What we are in now is a completely different situation from what we witnessed during the financial crisis, he said.
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However, he adds, there is no doubt that the supply side of the housing market is tense, and that it will increase in the future as the level of construction activity declines.
It is clear that this is a relationship that will contribute to raising house prices in the future, he said.
Hof himself believes there will be a rebound in the housing market when interest rates eventually start to fall again, but since the interest rate level is already high, he doesn’t expect it to be similar to what it was in 2016.
– It is ironic
Lauridsen in Eiendom Norge reacts to the fact that the authorities have not taken measures to accelerate housing construction.
– There are no measures in the budget to stimulate increased housing construction. “This is paradoxical when we are now moving at full speed into the largest housing construction crisis since the banking crisis of 1988-1992 at the same time that 1,000 new refugees per week are creating the need for additional housing,” he said in a press release in relation to this matter. With last week’s house price numbers.
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He mainly wants measures to stimulate more demand for housing, which he believes will give incentives to homebuilders to build more. One example is removing lending regulations, which will make it easier for people to get a mortgage.
– Why do you think the government did not take measures?
– What I think is probably that people haven’t quite realized how serious the situation is yet. “I think this is related to the fact that crises in the new housing market take time before the full consequences are seen,” he says.
He believes that demand will lead to higher prices
Handelsbanken’s chief economist says he doesn’t think increased demand will necessarily lead to more housing construction.
– We do not buy the assumption that increased demand in a situation where the supply side is structurally rigid should lead to anything other than higher prices, he says.
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