Tag Archive | "Norway"

Norway’s Housing Market May Take Serious Hit

Norway may just be the next country to see its residential real estate market face a massive decline in pricing. Economists are watching the market in Norway very closely after reports have indicated that debt levels in the country’s housing market are rising.

 

Household debt in Norway has risen at unsustainable levels over the past year, as people are borrowing under the belief that interest rates will remain at their current low levels.

 

Norway has, for the most part, avoided much of the international economic troubles faced by so many other countries around the rest of the world. Their good fortunate, however, may be what causes the economy to crash in the future in corrective measures are not soon taken. The current international economic struggles have caused many to believe that interest rates will remain low for quite some time. In addition, housing prices have risen astronomically, causing people to borrow even more money.

 

The nation has done fairly well in recent years, thanks to its status as one of the top ten exporters of oil in the world. However, policy makers are having a hard time figuring out what to do with respect to the potential housing bubble that is looking more likely everyday.

 

The current debt levels are considered to be very dangerous, and there is a tremendous fear that the current good times could come crashing down in the near future.

 

There has been no indication as of yet regarding how the Norwegian government will address the current debt issue, though economists warn that action must be taken now to avoid a disastrous situation in the future.

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Norway’s Oil Fund Joins Forces with Axa to Buy Paris Properties

In an effort to boost returns, Norway’s massive oil fund has opted to diversify its portfolio by purchasing international real estate. The government fund worked together with Axa, a real estate asset management company in order to make the purchase. Norway’s oil fund purchased three rental properties in Paris for roughly four hundred million dollars.

The purchase marks yet another real estate investment by the oil fund. Norway’s government fund has allocated twenty-five billion dollars to spend on international real estate investments. They are looking to take advantage of depressed market prices on units that will produce steady yearly income. In the case of the properties purchased in Paris, each of the three rental properties are fully occupied, thus generating guaranteed income year-over-year.

The fund has now made two purchases in the French capital, as well as one in London. The previous purchase in Paris involved a fifty percent stake in seven properties. That purchase cost the fund more than eight hundred million dollars. The oil fund also purchased a twenty-five percent stake in London’s Regent Street, which cost more than seven hundred million dollars.

Norway’s Oil Fund is not the only investment fund looking to international real estate to bolster its portfolio. A major of investors in prime European and American markets have been from international waters. As lenders continue to restrict lending to potential domestic property buyers, international buyers are taking advantage of low prices by paying with cash. That trend will likely continue into 2012, as prices continue to remain attractive in prime areas.

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Norway Seeks Tougher Mortgage Restrictions

In an effort to prevent a potentially disastrous bubble, Norway’s bank regulators have requested tougher limitations be placed on qualification standards for mortgage loans.

Currently, Norwegians are required to put down only ten percent for a down payment in order to secure a loan, regardless of the size of the loan. Regulators fear that small down payments allow for greater risk, as the amount of credit to value ratio increases substantially.

Norwegian financial experts believe that increased credit growth may eventually create a situation that will lead to underwater mortgages, thus prompting foreclosures at increased levels.

Regulators are pushing for a minimum of fifteen-percent down payment in order to secure a mortgage loan. Currently, housing prices are on the rise, having gained nearly ten percent in the last month. Rising housing prices, and lax mortgage loan restrictions could potentially create an environment that leads to uncontrollable consumer debt. Banking regulators in the country believe that, if restrictions are not put into place now, consumer debt is set to double overall income in Norway by next year.

Some officials are against the idea of increasing the required down payment, however, as they believe such a restrictive standard could potentially prevent first-time homebuyers from being able to purchase a home. They also fear that such lending policy changes could severely damage the outlook of the nation’s residential real estate market.

Norway currently has the lowest unemployment rate in the continent, which has played a role in the overall increase in property values. However, the likening debt crisis that is set to sweep across the continent has many officials worried that increased consumer debt could be detrimental to the nation’s overall economy. As such, they feel that changes in lending standards are absolutely necessary.

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