US prof warns of Norway housing bubble

US prof warns of Norway housing bubble
Photo: Erlend Aas/Scanpix
Norway’s housing market looks increasing like a bubble waiting to burst, according to a highly respected Yale professor.

Professor Robert Shiller has emerged as one of the world’s most influential economists after successfully predicting the dot-com crash and the collapse of the US housing market.

The US academic made his prognosis for Norway after taking stock of a 35-percent price rise across the country's residential housing market in the last five years.

“This really does look like a bubble,” he told business newspaper Dagens Næringsliv.

Shiller’s own real estate price index shows there to have been a 33-percent drop in home prices in the United States over the same period.

The professor, who is in Oslo to speak at an insurance conference on Wednesday,, said it was difficult to be sure whether a collapse was imminent.

“But it does look like it’s pretty close to the end,” he said.

The professor added that bubbles weren’t usually punctured by external factors. It wasn’t the financial crisis that caused the US housing market to crash, he said. In fact, it was the other way around.

“It was the drop in real estate prices from 2006 that eventually triggered the financial crisis,” said Shiller.

If Norway wants to dampen its bubble tendencies, he said, the country should seek political solutions that might include freeing up new areas for property construction.

“For centuries, towns have been spreading out ever further. I can’t imagine that would be a problem in Norway. If there’s one thing you have enough of, it’s land,” said Shiller.  

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