Saturday, September 14, 2013

A Substantial Shift

I wrote my first blog post exactly one year ago, so I think it's time for a comeback after a long (slightly longer than even the Norwegian average) summer holiday. This time I have an excuse for my radio silence: my partner in life is now an honorable, respectable woman, and we don't live in sin anymore.

I feel tempted to say that the summer of 2013 marked a turning point also in the Norwegian housing market. The coming months will prove me right or wrong, of course. But consider this:

  • The main banks (Nordea, and also DNB) see flat/negative price development in 2014 and 2015
  • Real estate agents talk about "stabilizing" market with increased supply and less bidding
  • Norwegian economy shows clear signs of slowing down and oil service industry is not expected to grow in 2014, compared with double-digit growth during last years

All this has brought us an environment where no one dares to take house price appreciation for granted anymore. Bi-annual research by Nordea (see above article) shows that while just six months ago 70 % of households expected prices to rise, in August only 32 % did so. I see a huge shift compared to just a year ago, when the general (SSB) expectations were for a 30 % price increase in the coming three years. It will be interesting to see where SSB will land in its next forecast.

Like I surely have mentioned before, SSB and the chief economists of the main banks will be among the last to tell you about falling house prices. It's just not in their interest to do so, and on top of that, they are the worst herd animals around - it's "If you're wrong and the others are right, you're out!" vs. "If you're wrong but the others are wrong too, who cares?". So it's safe to assume that they are fairly convinced of the price fall already.

When it comes to the talk about this "being good for the market, with supply finally meeting demand", I just ask: Weren't the sky high prices explained first and foremost by supply not meeting demand (see for example post about Erna Solberg, the new prime minister)? If supply finally meets demand, what will be the next thing supporting the all-time-high price level of  _____ (add here any - ANY - price per square metre)? Oil? New government? Unicorns?

Everyone has known for long that the prices are crazily high, but at the same time they have believed that there is a rational explanation, and that the prices will keep on climbing up. When all this is suddenly questioned, there will be consequences. Make no mistake about it.

No comments:

Post a Comment