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OUTLOOK FOR THE HOUSING MARKET
AND THE NORWEGIAN ECONOMY
GOVERNOR ØYSTEIN OLSEN Oslo, 7 November 2017
Topics
Outlook for the Norwegian economy
The housing market
Monetary policy
2
Topics
Outlook for the Norwegian economy
The housing market
Monetary policy
3
Main trading partners’ economies improve Quarterly growth.1) Percent
4 1) Three-quarter moving average Source: Thomson Reuters
-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
USEuro areaSwedenUK
Policy rates abroad have bottomed out
-1
0
1
2
3
4
5
6
2008 2010 2012 2014 2016 2018
USEuro area¹⁾ SwedenUK
Policy rates and estimated forward rates at 6 November 2017
5 1) ECB’s deposit rate. Eonia from 2017 Q3 Sources: Bloomberg, Thomson Reuters and Norges Bank
Norway: Growth has picked up
-4
-2
0
2
4
6
8
2005 2007 2009 2011 2013 2015 2017
Mainland GDPRegional network indicator
Four-quarter percentage change1)
6 1) GDP projection for 2017 Q3 and 2017 Q4 from MPR 3/17 Sources: Statistics Norway and Norges Bank
The krone has tracked the oil price USD per barrel Brent Blend and import-weighted exchange rate index1)
7 1) A positive slope denotes a stronger krone exchange rate. Sources: Thomson Reuters and Norges Bank
85
90
95
100
105
110
11520
40
60
80
100
120
2014 2015 2016 2017
Oil price (l.h.s.)
Exchange rate(r.h.s.)
Improved competitiveness Labour costs in Norway relative to trading partners’ labour costs1)
8
80
90
100
110
120
130
140
1995 1999 2003 2007 2011 2015
Measured in a commoncurrencyMeasured in domesticcurrency
1) Hourly labour costs in manufacturing. Index 1995 = 100. Sources: Statistics Norway, Norwegian Technical Calculation Committee for Wage Settlements (TBU) and Norges Bank
Economic policy has contributed Budget deficit. Percent of trend mainland GDP Key policy rate. Percent
0
1
2
3
4
5
6
7
2007 2009 2011 2013 2015 2017 2019
Forecast, September 2017
Forecast, March 2014
Key policy rate
0
2
4
6
8
10
2002 2005 2008 2011 2014 2017
Structural non-oil deficit
3% of the Government Pension FundGlobal
9 Source: Norges Bank Sources: Ministry of Finance and Norges Bank
Shift in driving forces Share of mainland GDP1)
10 1) Projections for 2017–2020 from MPR 3/17. Sources: Statistics Norway and Norges Bank
0
2
4
6
8
10
12
14
2000 2003 2006 2009 2012 2015 2018
Non-oil business investmentOil investmentHousing investment
Topics
Outlook for the Norwegian economy
The housing market
Monetary policy
11
Correction in the housing market House prices. Twelve-month percentage change
12
2010 2011 2012 2013 2014 2015 2016 2017-5
0
5
10
15
-1
0
1
2
3
Seasonally adjustedmonthly change (l.h.s.)
Twelve-month change(r.h.s.)
Sources: Eiendomsverdi, Finn.no, Real Estate Norway, Statistics Norway and Norges Bank
Regional differences
-10
-5
0
5
10
15
20
25
30
2012 2013 2014 2015 2016 2017
OsloStavangerBergenTrondheim
Twelve-month percentage change
13 Sources: Eiendomsverdi, Finn.no and Real Estate Norway
House prices are high relative to income Index. 1998 Q4 = 100.
14
0
50
100
150
200
1983 1988 1993 1998 2003 2008 2013
Crises
House prices/disposable income
House prices/disposable incomeper capita (aged 15-74)
Sources: Eiendomsverdi, Finn.no, Norwegian Association of Real Estate Agents (NEF), Real Estate Norway, Statistics Norway and Norges Bank
More new dwellings than households Number of housing starts and change in number of households1)
15
0
10,000
20,000
30,000
40,000
50,000
2005 2007 2009 2011 2013 2015 2017 1)
Housing starts
Change in number ofhouseholds
1) Projections for housing starts and change in number of households for 2017. Sources: Statistics Norway and Norges Bank
Some tightening of credit standards Households. 2/1 = Substantial/moderate rise/easing, 0 = Approximately unchanged, -1/-2 = Substantial/moderate decline/tightening
16
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2008 2010 2012 2014 2016
Change in demand pastquarter
Change in creditstandards past quarter
Neste kvartalNext quarter
Source: Norges Bank
Indebtedness remains high Household debt ratio
17
190
200
210
220
230
2010 2012 2014 2016
Debt as a percentage ofdiposable incomeProjections, MPR 3/17
Sources: Eiendomsverdi, Finn.no, Real Estate Norway, Statistics Norway and Norges Bank
Risk of fall in household consumption Share of households. Percent
High LTV ratio: Net debt exceeding the market value of the dwelling
High DTI ratio: Debt exceeding five times gross income
Low debt-servicing capacity: Less than one month’s income remaining after payment of interest, minimum principal and ordinary consumption expenditures (on an annual basis)
18
0
5
10
15
20
25
LTV DTI Debt-servicingcapacity
20102015
Sources: Norwegian Mapping Authority, SIFO, Statistics Norway and Norges Bank
Topics
Outlook for the Norwegian economy
The housing market
Monetary policy
19
Monetary policy in Norway
Low and stable inflation
Stable developments in output
and employment
Monetary policy must be robust
20
-2
0
2
4
6
8
10
12
1985 1990 1995 2000 2005 2010 2015
CPI
Five-year moving average
Inflation target
Sources: Statistics Norway and Norges Bank
Monetary policy Projections in Monetary Policy Report 3/17
21
0
1
2
3
4
2010 2012 2014 2016 2018 2020
CPI-ATE 1) Projections
-2
-1
0
1
2010 2012 2014 2016 2018 2020
Output gap projections
1) CPI adjusted for tax changes and excluding energy products. Sources: Statistics Norway and Norges Bank
The Executive Board’s assessment and interest rate forecast
On the basis of an overall assessment, the Executive Board decided to keep the key policy rate unchanged at 0.5%.
The Executive Board’s current assessment of the outlook and the balance of risks suggests that the key policy rate will remain at today’s level in the period ahead.
22
0
1
2
3
4
5
6
7
2007 2009 2011 2013 2015 2017 2019
Key policy rateMPR 3/17MPR 2/17
Source: Norges Bank
OUTLOOK FOR THE HOUSING MARKET
AND THE NORWEGIAN ECONOMY
GOVERNOR ØYSTEIN OLSEN Oslo, 7 November 2017