Norway heading for spain-style bust?

Norway, which chose to remain outside the EU and the euro currency, enjoys an enviably stable economy and a booming housing market — but it could be going down the perilous route taken by Spain and Ireland, according to economists and recent analysis.

According to a report by Bank of New York (BNY) Mellon, Norway’s housing sector, which has seen prices jump by almost 30 percent since 2006 — could end up replicating a pattern of housing booms and busts seen across the globe, from the U.S. to Japan to Spain and Ireland.

Neil Mellor from BNY Mellon said that Norway’s central bank, has neglected its housing market’s indomitable price rise by focusing on a monetary policy of low and stable inflation.

“In focussing solely on indices for goods and services, Norges Bank is failing to address some unnerving trends in a sector whose stability is vital to that of the economy as a whole.

“Low interest rates, stable consumer price inflation and booming asset prices combine to form conditions whereby debt is accumulated at a growing rate to levels that contravene conventional rules of thumb pertaining to stability.”