Interest rate deferral does not scare home buyers – E24

Despite signals of persistently high key interest rates, further house price growth is still expected. – Good speed in the market, says broker manager.

When central bank governor Ida Wolden and the rest of the interest rate committee chose to keep the policy rate unchanged last week, they also announced that interest rates will remain at their current level for “a long time to come”.

After the central bank started raising the key interest rate at a rapid pace, the housing market has taken a hit.

But the housing spring has not been as bleak as was predicted last autumn, and strong growth is expected going forward.

– There has been very good momentum in the market after Easter, says the head of DNB Eiendom, Renate Sørestrand-Hansen, in a statement ahead of the housing price figures for April that Eiendom Norge presents on Monday morning.

DNB Eiendom expects a nominal price increase of 1.2 per cent for April.

May take time with cuts

In March, the governor of the central bank mentioned that September could be the month the interest rate is cut.

Now, however, there is less evidence of that. It could actually take a year, Nordea Markets and several other experts are to be believed.

Although the interest rate will probably be kept high for longer than one might have thought a few months ago, the housing market is still red-hot.

– We haven’t actually seen such good April numbers, but that also has a bit of a connection with early Easter, says Sørestrand-Hansen.

Despite the fact that Norges Bank has announced high interest rates for quite some time to come, Sørestrand-Hansen highlights signals that the interest rate peak has been reached.

– Norges Bank’s clear signal that the interest rate peak has been reached and that there may be an interest rate cut during the year has given buyers far better predictability than last autumn, she says.

– Rising expectations

In the previous monetary policy report from Norges Bank, the central bank predicted a seasonally adjusted house price increase of 0.3 per cent in March. The margin ended at 0.6 percent.

In Norges Bank’s forecasts, it is stated that the seasonally adjusted prices for April will end at 0.4 per cent. It is lower than what DNB Markets thinks.

Chief economist at DNB Markets Kjersti Haugland says the brokerage believes seasonally adjusted housing prices in April will rise at the same rate as in the first three months of the year.

– Specifically, we estimate a price increase of 0.6 per cent from March, adjusted for seasonal variations, writes Haugland in a press release.

House prices so far this year have been higher than most had expected.

She refers to a strong labor market, high wage growth and low price growth. It supports the demand for buying a home, she says.

– Rising expectations among buyers about interest rate cuts before the end of the year probably contribute in the same direction.

– Will dominate the mood picture

Although the interest rate cut may be delayed, it does not scare home buyers, believes Hilde Karoline Midsem, chief economist at the Norwegian Housing Association (NBBL).

NBBL measures the pace of the housing market through what is called the Housing Barometer. There they examine households’ beliefs about what will happen to interest rates and house prices in the future.

Midsem says the most important thing for the housing market is that the main message from Norges Bank is that the interest rate peak has been reached.

– My “hunch” is that the decisive factor is that Norges Bank says they believe the interest rate peak has been reached: Implicitly that the next change is down. It will dominate the mood, she says.

Midsem further says that households’ expectations took a “complete reversal” in December when the interest rate was raised to the level we have today of 4.5 per cent.

– Expectations that the interest rate peak has been reached have basically remained the same since then. The same applies to price expectations. They have only become more and more positive. From March to April, the proportion expecting higher house prices increased from 62 to 68 per cent, she says.