* House prices rose 7.7 pct in 2012
* Bank capital rule change may limit gains to 4-6 pct this
* Property bubble could still develop, says real estate body
* Central Bank has flagged rate hike despite soaring crown
OSLO, Jan 2 Norway's hot housing market will
likely cool slightly this year, reined in by policy changes
after high demand pushed prices to record highs in 2012, two
industry associations said on Wednesday.
House prices could rise between 4 and 6 percent this year
after a 7.7 percent increase in 2012 as new rules on bank loan
reserves impact mortgage lending, Norwegian realtor association
NEF and real estate agency body EFF said.
"Underlying market conditions would warrant an increase of
8-10 percent in 2013 but we expect that measures from the
government will lead to higher mortgage (loan) rates and thus
lower property price growth," Leif Laugen, the deputy head of
EFF told a news conference.
Norway's real estate market has been fuelled by high
immigration and a booming economy that has made its central bank
reluctant to raise borrowing costs, putting much of the onus on
the government to cool prices.
In 2012 it cut the maximum loan-to-value rate on new housing
loans to 85 percent from 90 percent, and it has asked the
banking regulator to set bigger minimum capital buffers sometime
this year on lenders' mortgage accounts.
Although the construction sector is running close to
capacity, the central bank estimates 10,000 fewer homes were
built in each of the past three years than the market would have
"High activity, strong confidence indicators and low
interest rates have resulted in great demand and pressure on
housing prices," Laugen said.
Prices and household debt levels have gone so high that
several institutions, including the IMF and the OECD, have
warned Norway was at risk of developing a housing bubble.
"These factors could indeed result in a bubble in the future
but I'm not saying we have a bubble right now," Laugen said.
A rise in base interest rate - currently at 1.5 percent -
would also cool the property market, but the central bank's hand
has until now been stayed by a Norwegian crown trading near
all-time highs against the euro and that would strengthen
further if rates rose.
That picture may change in coming months with Norges Bank
having flagged a hike possibly as soon as March, suggesting it
is prepared to accept a soaring currency to cool an economy that
could expand by close to 3 percent this year while much of the
rest of Europe flirts with recession.
Norway's population grew by 1.4 percent last year, primarily
due to rapid immigration, as the oil-fed economic boom soaked up
The country's top commercial banks include DNB,
Danske Bank, Handelsbanken, Nordea
, SEB and Swedbank.
(Reporting by Camilla Knudsen; Writing by Balazs Koranyi;
Editing by John Stonestreet)