Macroprudential Policies and Housing Prices in Oslo The effect of loan-to-value and debt-to-income regulations on the Oslo housing market

Abstract

As a result of the severe consequences of the financial crisis in 2008, together with a recent rise in housing prices and household debt, Norway has imposed several macroprudential policies to limit the buildup of financial imbalances. The effect of such policies is yet to be understood sufficiently. This thesis examines the effect of the macroprudential policies imposed in Norway. Specifically, we investigate how loan-to-value regulations and debt-toincome regulations have influenced the selling price of dwellings in Oslo. Using highresolution data on housing trans-actions in Oslo, we employ hedonic regression and regression discontinuity designs to uncover the effect of the regulations. We find that the loanto- value regulation caused the selling price of dwellings to fall three weeks before the implementation of the policy. However, the effect is short lived, as the price development continued upwards only three months after the implemen-tation. Further, we find that the debtto- income regulation had a slower effect on the housing prices, causing the price development to fall three months after the policy was implemented. Moreover, using supplemental time series regression, we find that the debt-to-income policy may have had a more long-term effect on the housing market than the loan-to-value policy.