People are borrowing more and more, but it’s just as much to get a place in the social hierarchy.
Last autumn, several experts said that there was no reason to fear a bang in the housing market, although people borrowed more and house prices rose. Since then, household loan growth has increased further. According to Statistics Norway (Statistics Norway), people raised their borrowing by the end of 2012. The statistics showed that we raised $ 20 billion in debt from October to November, so households at the end of November had NOK 2370 billion in gross debt.
But if you have been one of those who have contributed to increasing loan growth, it’s necessarily not just because you need a place to live, but maybe even because you need a place in the social hierarchy..
– The more social criteria a home meets, the more people are willing to pay for it, and says Researcher II at the Danish Center for Consumer Research, Christian Poppe, to bonytt. no.
This way, the home loan also contributes to a social investment, which can also be price-intensive because in our surveys it appears that they asked are willing to pay more for a home if it fulfills many of the social requirements.
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In a Danish survey published in 2009, and referenced on site science. dk, it concludes that borrowing is not always based on rational economic assessments, but that it is as much about social positioning that we can live in the same way that our circle of friends does.
So what people think is a loan to a fi nancial investment is as much talk of a contribution to social positioning, Poppe expands.
– It’s about factors such as the living environment, the children’s school and where one’s parents live. And in our focus groups, the majority say that for a given sum of money, they would buy a smaller square if the home filled many of the social requirements and desires than a larger home in a less attractive area.
But social preferences also change with the life situation and private economy.
For example, it is often easy to rent when you are young, while when you get older, especially when you get children, it becomes more important to own, explains Poppe.
In addition to the fact that the loan is used to finance more expensive housing purchases than necessary, the surveys of Poppe and his colleagues have shown that the home loan is also used to finance other things than the home purchase itself..
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– It is known that homeowners borrow extra than the cost of housing to finance other things such as car, refurbishment and clean consumption. Since the early 90’s we have called this consumption loop. It is difficult, perhaps impossible, to estimate how much of the total loan due to such mechanisms, but it is beyond doubt that the consumption gap is significant. It is of course also big, perhaps more important, when it comes to refinancing the home. Refinancing is often motivated by having other needs that need financing.
Destructive to the welfare contract
But while a loan can be a social entry ticket, it can also be the opposite.
First and foremost, this is about first-time entrepreneurs, who simply do not have financial carrying capacity to raise such a large loan as is necessary to buy a home.
It can be argued that it is about the legitimacy of welfare contracts that a group of people who need housing are closed out of the housing market, Poppe emphasizes.
According to associate professor at BI Norwegian Business School and Professor of Property Economics at the University of Environment and Biotechnology in Ås, Dag Sommervoll, the size of the mortgage can also be shaped by expectations of what is perceived as a normal loan.
– And as a result of low interest rates over time, the size of a standard loan has increased, he says to bonytt. no.
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– The size of the mortgage can also be seen as social pressure from the environment in relation to what is perceived as a normal housing.
– But on the other hand, I do not perceive that people demand more loans because the standard loan has now grown. The loan itself is not observable for friends and neighbors, but it is the home loan the loan makes possible. And so on, the mortgage can be ripped behind the mirror in those contexts where the housing will not be economically manageable..
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