Norway’s real estate brokers are now joining calls for the central bank to raise interest rates and cap a rally in their own market to prevent a potential property bubble from bursting.
Rates should be 1 percentage point to 2 percentage points higher than their current level because the Norwegian economy is running at close to full capacity, Leif Laugen, deputy leader at the Association of Norwegian Real Estate Broking Companies, said in an interview yesterday.
“I’m sorry to say, but I don’t think they” will raise rates, said Laugen, whose group represents about 520 realtors. “We’ve seen over the last year that their priority is on the currency situation and the export industries -- and not on the internal situation in the Norwegian economy.”
The bank lowered rates twice since December to stem inflows as the krone emerged as a haven from Europe’s debt. Low rates helped pushed house prices to records and stoked demand as Europe’s second-largest oil exporter benefits from record offshore investments and unemployment of 3 percent.
The country’s financial regulator and economists including Yale University’s Robert Shiller have urged policy makers and politicians to tackle the threat of a full-blown housing bubble and the risks to financial stability.
The krone gained less than 0.1 percent to 7.3119 per euro as of 8:48 a.m. in Oslo.
A report yesterday showed house prices rose an annual 8.1 percent in August from a year earlier. Home prices are up 30 percent since 2008, according to data from the Norwegian Association of Real Estate Agents.
Hopefully the increase will abate to 5 to 6 percent and “then it is not too far from wage increases,” Laugen said, predicting a “soft landing” for the housing market.
Policy makers warned last week that they may start raising their benchmark as early as December amid growing concern that the Nordic economy may be facing a property bubble. Unabated house price gains prompted Finance Minister Sigbjoern Johnsen to in July call on banks to tighten their credit practices.
“What they have to do is lower the budget and maybe ask the banks to increase the limits on how much to lend to the public,” said Laugen.
Norway’s financial watchdog last year pushed through guidelines for banks, urging them not to grant loans that make up more than 85 percent of a property’s value. The stricter lending practices did little to damp home prices.
Household credit growth rose to 7.2 percent in July from 7.1 percent in June, according to Statistics Norway. The country’s household debt burden will surpass 200 percent of disposable incomes next year, according to central bank estimates.
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