Could Australia be mirroring Norway’s house price reversion?


Norway’s house prices are losing ground like Australia’s, adding to concerns that economic growth will be thrown off track and that banking regulators have gone too hard.

Both housing markets have started to reverse in recent months, after a period of rapid growth in house prices and mortgage debt.

Housing prices fell a seasonally adjusted 0.5 per cent in Norway, Real Estate Norway, Eiendomsverdi and said in a monthly report.

Nationwide they fell 2.1 per cent over the year through December, driven by a 6.2 per cent decline in Oslo.

By comparison, Australia’s long-running house price gains have started to trend the other way, with new data showing national dwelling price growth is falling.

CoreLogic’s December Home Value Index showed Sydney property values fell 0.9 per cent in December, leading a 0.3 per cent fall nationally in values.

Sydney fell 2.1 per cent in the quarter, with the national figure also down 0.3 per cent over the three months to December.

Again, like Australia, Norway’s property market started to cool following a tightening of lending standards at the start of 2017.

Australia’s APRA has twice intervened directly in lending markets to ration the amount of credit that property investors can have, with caps on investor loans.

The Norwegian government has now asked the Financial Supervisory Authority to advise on the impact of tighter lending rules and whether they should be extended past a June 30 expiration date.

“We believe there is still further downside to prices both nationally and in Oslo as the stock of unsold houses is still elevated,” said Halfdan Fenwick Grangard, a senior economist at Svenska Handelsbanken in Oslo.

“However, we do not share the view held by some that housing prices, in general, are in for a prolonged downturn. We expect housing prices to fall moderately over the next few quarters before levelling out.”

In a report published by the OECD last month, the group warned that Norway should prepare for a possible housing correction. The OECD also said in March last year that Australia’s vulnerability to a house price collapse morphing into a recession has sharpened because of ballooning household debt and the dominance of big banks.

The US-based credit agency Moody’s also said in a report that the Norwegian housing market appears to be the most “stretched” when comparing price levels to what they define as a market equilibrium among 20 advanced economies.

The central bank has so far appeared sanguine on the housing market, with Governor Oystein Olsen saying last month that he foresees a “soft landing”.

The bank signalled on December 14 that it could raise interest rates sooner than anticipated, indicating a first rate hike by the end of 2018.

with Sveinung Sleire and Jonas Cho Walsgard



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