Harald Magnus Andreessen, Housing | The chief economist warns: rising interest rates are malignant

OPERAEN (Nettavisen Økonomi): Eiendom Norge on Tuesday gathered 300 guests for its big annual conference.

Harald Magnus Andreassen, chief economist at SpareBank 1 Markets, has been known for many years for predicting a decline in the housing market. Late this fall, he believed in a decline of at least 10 percent.

– But I will not be a prophet in my country, at least for now, he said with self-irony.

Andreessen had been given the topic “Eternal Rise in the Housing Market?” The answer to that was a clear no.

Everyone has gone through a housing crisis

Almost all rich countries have gone through a housing boom. Some countries have had two rounds, and some countries have had three. The average drop in these rounds was 31 percent if we correct for price inflation. The actual decrease was 23 percent.

Andreessen warned the association that it took an average of ten years before prices returned to the same level. But he did not make any accurate predictions about the housing market going forward.

– I know I don’t know. You know I don’t know.

Figures from Eiendom Norge for May showed an increase of 0.8 per cent. This is a normal increase for the month. So far this year, prices are up 7.7 percent. The rise is a microscopic 0.1 percent over the past twelve months.

Interest rates are important to the housing market. Andreessen worried that interest rates had been kept too low for too long.

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We didn’t need a low interest rate

We got low interest rates in Norway after the financial crisis. Not because we need it, but because other countries have lowered interest rates. Use low interest rates to pay off debt.

Norway is the country with the highest debt in terms of income. In rich countries, families have reduced debt as a percentage of income. The rise in interest rates we are seeing is insidious. The Chief Economist warned that it is not matched by a similar growth in the economy.

Interest rates are now rising because the Norges Bank and other central banks must control price inflation. But growth in the Norwegian economy is expected to decline sharply this year. Unemployment is on the rise. The economy must calm down.

Bad news for borrowers: no rate cuts are in sight

Low interest rates don’t help

– Andreessen said that if the economy is bad, low interest rates will not help him.

The chief economist believes that there will be no return to the interest rates we had during the Corona pandemic.

– The chief economist said that interest rates will not be so low again unless there is a new crisis.

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shaped by the banking crisis

Andreassen was shaped as an economist by what happened during the Norwegian banking crisis in the early 1990s. House prices in Norway fell by about 40 percent from 1988 to 1992.

Usually a crisis in the economy begins in the housing market, as it did during the financial crisis 15 years ago,

My best analysis as an economist is that something went wrong with the housing markets of rich countries in the years leading up to the financial crisis. The downturn in economies comes after taking on a lot of debt.

— The chief economist told the General Assembly that almost all contractions in the economy follow a downturn in the housing market.