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Young people fear a collapse in the housing market, as do those with high incomes and higher education.
Kantar has conducted a survey of the housing market on behalf of Nordea. And the recent survey shows that three in ten respondents fear a sharp drop in house prices. In reality, men are more pessimistic than women, but the greatest fear is found in the youngest.
Up to 45 percent of those under the age of 30 fear in the survey that house prices will fall rapidly.
– We have had a price increase for a long time. When prices have been as good as they have for such a long period, prices can go down again at some point. The crown situation means that people have become more insecure about their own jobs and finances, consumer economist Derya Incedursun in Nordea tells Nettavisen Økonomi.
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Capital
– Almost one in two people under 30 in the survey is afraid of a sharp drop in prices?
– There is greater concern among newly established youth who have high debt compared to those who have paid the mortgage and have accumulated a good cushion.
– Young people do not have it and have invested their assets in housing. Therefore, it is not surprising that young people have greater concerns. The young and the newly established are also the ones who are most concerned about rising interest rates, Incedursun responds.
But with such a large proportion that they fear a stool at home, perhaps young people should refrain from buying a house now?
5 percentage points
– This is something that the individual should consider and if they have the finances to support an increase in the interest rate. According to mortgage regulations, borrowers must tolerate an increase of 5 percentage points, which the bank includes in the calculation.
– But many borrowers probably run out of limit and don’t think about what the economy will look like in the future, the consumer economist believes.
It also emphasizes that many of today’s young borrowers have not experienced any significant increase in interest rates. There was some spike until 2019 before the crown crisis started, but mortgage rates still haven’t risen to more than around 3 percent.
Never experienced
– There are many young people who have not experienced high interest rates, and from the 2000s to today, house prices have risen 200 percent, says Incedursun.
In 2000, mortgage rates reached 8 percent and rose to 7 percent in the financial crisis of 2008. In 2009, on the other hand, interest rates fell again to 4 percent.
But even if the interest rate hike is short-lived and only lasts for a year, it could hurt the economy, warns Nordea’s consumer economist.
– Are you surprised by the survey findings?
– I’m not surprised that the little ones are more worried, I understand. Many have a vulnerable economy. At the same time, we see in the survey that those with the highest incomes and the highest education are also more concerned than the average. In this group, four out of ten believe in a homemade stool.
Also read: Predict an insane price increase: Experts have no doubts about which areas of Oslo you should invest in (+)
Koronaoppgang
House prices have risen significantly during the crown crisis. The latest figures from Eiendom Norge show that house prices at the end of October were 7.1% higher than a year ago.
In Oslo, the price increase in the period is up to 9.5 percent, and this could lead to double-digit inflation in the capital throughout 2020.
Domestic accidents can occur when the imbalance between supply and demand is large. If demand is low, prices also fall.
Incedursun says there are several factors that affect demand, such as people’s perceptions of the prospects for the housing market, unemployment, interest rates, wage levels, and a belief in their own ability to pay.
Hit hard
– An example is Stavanger, which was hit hard by the oil crisis in 2014. Interest rates were still low, but here they saw unemployment rise and house prices fell dramatically. If we go back ten years, the price per square meter of apartments in Stavanger was on par with prices in Oslo, says Incedursun.
The contrast between Stavanger and Oslo is striking. In the last ten years, house prices in Stavanger have risen just over 10 percent, in Oslo a staggering 103.5 percent (see table below).
– How do you value the housing market in the future?
-We have not yet overcome the crisis of the crown, and there is still uncertainty about the development, especially in the labor market. But for now, it doesn’t look like the Norwegian property market will explode anytime soon, Incedursun responds.
Clear imbalance
And if some market players believe, or fear, that the growth in house prices in Oslo could be at least as strong next year as this year. Growth can reach a staggering 25 percent in 2020-2022.
This is due to the combination of low interest rates and the fact that few new homes have been approved in recent years. In 2021, there will be fewer new homes on the Oslo market than this year.
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