The Norwegian Housing Market: Financial stability on the edge?

Camilla Maltina Gravdal

Student thesis: Master thesis


The Norwegian housing market has seen a soaring development throughout the past decades. Looking particularly into the current situation, it seems that the increasing house prices and household debt is a direct threat to the Norway’s financial stability. Government interventions, such as Loan- to – value ratio (LTV), is used as a stabilizing tool to diminish abnormal fluctuations in an economy. The Norwegian market and regional economic differences will be used as a case study, and provide a framework that will be applicable for other advanced economies in seeing under which circumstances an implemented tighter control of a LTV ratio is valuable for financial stability. The LTV behavior will be analyzed to see what economic factors are best suited for this intervention. For the purpose of this thesis, Norway is divided into seven geographical regions, where each will be examined to see how such different regions in an economy behave. Furthermore, to analyze the reasoning behind the growth in housing prices and household debt, and to evaluate any such correlation to financial stability. In order to understand how these different regions behaves, a set of fundamental factors were conducted from previous empirical evidence and studies. Together with statistical evidence, multiple regression is used to identify the correlation. as well as each variables strength towards explaining the variation in the expansion in prices and debt. Moreover, to find the optimum combination towards an LTV effect. It seems that there is a sound reason to argue that an LTV implementation diminishes both housing prices and household debt. However, only under certain economic conditions and factors, where it can be used as a tool to adjust the price growth in any of the two dependent variables.

EducationsMSc in Accounting, Strategy and Control, (Graduate Programme) Final Thesis
Publication date2017
Number of pages83