tag:blogger.com,1999:blog-515427400466373176.post5742485799906959225..comments2019-09-03T07:51:27.469+02:00Comments on The Norwegian Bubble: Paul Krugman vs. Erna SolbergAntti Jokinenhttp://www.blogger.com/profile/04778440661520118404noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-515427400466373176.post-32332939475895479112014-01-21T20:15:46.566+01:002014-01-21T20:15:46.566+01:00Hello, fellow blogger! :)
I has been in Oslo in 20...Hello, fellow blogger! :)<br />I has been in Oslo in 2003/4 during my exchange. It was a lovely city. Since then I have kept eyes on things going on in Norway. This blog open a new window for me. Thanks a lot. Currently I am studying finance in M. Phil level in Netherlands so I think it would be interesting to trace "bubble-alike" topic.<br />Ok, brief introduction is done. let's get the question start!<br />I am wondering whether foreign investors would be the major reason for this price surge. Asset prices are valued, with my understanding, its expected cash-flow and discounted rate(reflecting the risk). As many can see, the EU zone has been sluggish for long time and has been in short of investment opportunities. Nordic regions and its currencies, i.e. NOK, SEK and DDK are presented as a good alternative. When foreign investors convert their EUR to Nordic currencies, what they will put in next? Stock market is one, housing is another. Not to mentioned that in housing market they could take leverage to enhance return. <br />So, if what mentioned above is true, then high price-to-rent, price-to-income and debt-to-income might be the result of foreign investment, not the result of a "bubble". When Case and Shiller(2003) mentioned about what bubble is they describe it as "excessive public expectations of future price increases cause prices to be temporarily elevated"<br /><br />I cannot read Norwegian yet. However, this is my question to ask: "Do local Norwegian people really expect the future price will increase and then have the anxiety to buy the house NOW? or they might be aware of the foreign investment influx and realize such price surge is merely temporary effects?"<br /><br />If the former one prevails, then it is really more like a bubble, otherwise, people do realize that such price level would some ebb away (when EU zone gets better) and then enjoy the low rent given in the current situation. Then, not really bubble is. It is just a shift among investors.<br /><br />And that is why I consider those ratios might not be indicative. Price-to-rent would naturally high since they are abundant housing supply and most Norwegian still do not need to buy house. Price-to-income would naturally high since those housing are not meant for local investors/buyers. Debt-to-income are certainly high since most debts are not carried by local individuals, they are carried by foreign investment vehicles, or covered by alternative names.<br /><br />I am not trying to say, "there is no bubble" or "price will continue to rise". What I would like to point out is, if there were a bubble and there were about to bust, where shall we looking at? Where was this price surge originally from? and would that vanish sooner rather later? Islaballenahttps://www.blogger.com/profile/06812473818767953264noreply@blogger.comtag:blogger.com,1999:blog-515427400466373176.post-2705832895696703152014-01-21T07:33:49.027+01:002014-01-21T07:33:49.027+01:00Since long before the norwegian election in 2013, ...Since long before the norwegian election in 2013, I've felt that in his heart of hearts, Jens Stoltenberg is relieved to pass the prime minister job on to Erna, he has long since seen the indicators point towards a severe economic contraction.<br /> <br />I think Erna knows this as well, but since she isn't an economic pro like Stoltenberg, she can fool herself along the lines of: Well, the contraction/soon to burst bubble isn't _certain_, and as long as it isn't, I better play the game of optimism, that may indeed turn out to solve things, by itself, in the end!<br /><br />And then she pours herself a drink;)<br /><br />A final point about Norway being "special": Because of the oil exports and an independent currency, Norwegian kroner has by and large been in demand since 08, which meant that our central bank kept the interest rate artificially low, in order to avoid a sky high Krone and thus dwindling exports. (QE-)money on the run from a world in economic contraction, pressured our krone, kept our interests rate down, and fed the norwegian bubble. And our status as oil exporter (and shallow media, and all the rest...) made it possible for this to go under the radar these past six years. And now, when things finally have begun to turn, we are in a worse position than we would have been, if the contraction had started in 08, when our housing prices and household debt were already too high. So we're special in the sense of having prolonged the party and intensified the coming hangover. Another drink, Erna! Cheers.tarjei vhttps://www.blogger.com/profile/13190939797921343922noreply@blogger.comtag:blogger.com,1999:blog-515427400466373176.post-91291190604173829382014-01-13T13:07:36.957+01:002014-01-13T13:07:36.957+01:00Is there any way to tell what the real estate spec...Is there any way to tell what the real estate speculators are doing right now? I have a feeling that the recent "reassurance" in the media about the housing market is an effort from the investors to dump their assets onto the market before the bubble pops.Kimnoreply@blogger.comtag:blogger.com,1999:blog-515427400466373176.post-56158279668150465982014-01-11T21:21:37.272+01:002014-01-11T21:21:37.272+01:00Yup.
Regarding the tendency of the Norwegian medi...Yup. <br />Regarding the tendency of the Norwegian media to quote real estate brokers for their opinion that of course there is no bubble and it's an ideal time to buy a house, there is a very relevant saying: never ask a barber if you need a haircut.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-515427400466373176.post-32962847687980078912014-01-11T17:39:48.562+01:002014-01-11T17:39:48.562+01:00Does anyone know a place where, as a rule, a young...Does anyone know a place where, as a rule, a young graduate approaches bank with the first pay slip, for a loan? Maybe a Gulf country, but even there it wouldnt be related to the first pay slip, rather sudsidy would be in the form of grant(s) I guess?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-515427400466373176.post-37349905577679500472014-01-09T20:11:48.661+01:002014-01-09T20:11:48.661+01:00I'm convinced that the people who insist that ...I'm convinced that the people who insist that everything is fine know that they're lying and are just trying to wring every last kroner they can out of the suckers before everything goes to shit.Patrickhttps://www.blogger.com/profile/15948970691499063615noreply@blogger.com