The Unassuming Economist

“House prices in Norway rose strongly in recent years but stabilized in late 2012. Various factors have been contributing to rising house prices, including high income and wage growth, immigrant inflows, and supply constraints. Nevertheless, there are signs of overvaluation with a sustained increase in the price-to-income ratio and a large deviation in the price-to-rent ratio from its historical average. Staff’s updated estimates on house price valuation gaps, based on the three measures of valuation used in the background papers for the 2013 Nordic Regional Report and Norway Article IV report, suggest a slight correction in the degree of overvaluation in 2013, but prices remain above equilibrium by varying degrees according to different estimates,” says the IMF’s new annual economic report on Norway.