High prices for electricity, oil and gas, and historically large price growth have characterized the year so far. It may seem that “everything” is becoming more expensive. Norges Bank has found itself forced to raise the key interest rate, which will lead to higher interest rates for many who are in debt. But head of allocation and global interest rates in Storebrand, Olav Chen, believes that there is a bright spot in what might otherwise seem like a gloomy picture. House prices may fall, and with that, inequalities will be evened out, according to Chen. – The premise is, of course, that I believe increased inequality has primarily gone via the largest distribution of wealth via the housing market, and via housing prices. Chen’s idea is that lower house prices will give more people the opportunity to improve their own living situation. – If higher interest rates dampen house prices, as I think it does, then more people will have the opportunity to buy a bigger and better home. And housing is perhaps the largest and most important investment or consumption one has beyond food and energy. Interest rate policy is not the right tool LO chief economist Roger Bjørnstad agrees with Chen that the housing market is an important source of inequality. But he believes that interest rate policy is not the right way to cope with the high prices. – It is a major social problem between generations that the entrance fee to the housing market has become so high. But it is not solved by the interest rate. Interest rates fluctuate up and down and have no long-term effects on the housing market. Roger Bjørnstad is chief economist at LO. Photo: Johan B. Sættem / news Bjørnstad acknowledges that the planned interest rate increases can affect the house price, but that higher interest rates will be problematic for those with a lot of debt. Will hit unsocial He expects that the announced interest rate increases will curb inflation on homes and may even lead to falling prices. – And it will affect very unsocial in isolation because very many, especially families with low incomes and without wealth, have had to take up high debt to enter the housing market, says Bjørnstad. He reminds us that interest rates are rising again after falling sharply during the pandemic. – To point out that this rise in interest rates alone will solve the problems in the housing market, I disagree with. Rising house prices have led to the value of real estate having increased significantly in the last 30 years. The picture is from Stavanger. Photo: Ole Andreas Bø / news LO’s chief economist describes the housing market as «creating inequality», where there will be large differences depending on whether you own or not. – Those who are inside the housing market get good price growth on their homes, but the entrance fee for those who are outside is sky high. So housing policy must be reviewed. Because this is not sustainable. House price growth has been higher than wage growth for decades and then this must be solved with debt accumulation instead. Want more housing construction – I say that more should be built as well, but if higher interest rates lead to lower housing prices then it is welcome. Because it will actually reduce social inequality, he says. Chen believes the world is in a completely different situation now than what we have experienced in recent decades. – For 40 years, things have gotten better and better all the way. There were lower interest rates, cheaper clothes and shoes, cheaper TVs, cheaper technology. Everything has been cheaper for 40 years. The fear now is that we are at a crossroads: that things are getting worse.
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Rising interest rates are positive for those with low incomes – in the long run – news Norway – Overview of news from different parts of the country
