This supports the interpretation of the first price peak as a property price bubble. The value of office property increased in 2005, from a historically low level. In relation to historical levels, the rise in the value of commercial property seems to be moderate, compared with the rise in capacity utilisation. One possible reason for this may be that employment growth was for a long period relatively low in this upturn compared with the upturns in the 1980s and 1990s. This has now changed. In addition, signals from market participants indicate that the rise in value for 2005 as a whole will be sharper than the chart estimate, which was calculated as of July 2005. Developments in real house prices also tracked developments in capacity utilisation from 1985 to 1998. In the period since then, however, house prices have increased further at a steady pace, even when business cycles have fluctuated. This sharp rise, combined with similarly strong growth in household debt, may be viewed to some extent as a delayed adaptation to the deregulation of the housing and credit markets in the 1980s, after many households burned their fingers immediately after deregulation. In recent years, household income growth has been solid, household confidence regarding the future has been strong and households probably perceive higher income levels as permanent. This may have resulted in a further rise in house prices and debt. In addition, low real interest rates are currently making a contribution. Sales in the commercial property market reached a very high level in 2005.
In the next 10 years, gas production could rise to at least the same level as oil production, measured by energy content. High oil prices have led to a strong increase in activity on the Norwegian continental shelf. Many projects have been launched to increase recovery from fields in operation. A number of companies have revised up the long-term oil prices that are used as a basis for investment decisions, but they are still moderate compared with futures prices. Further out in the projection period, developments in petroleum-related investment become highly uncertain. It is assumed that overall activity will decline somewhat when the Snøhvit and Ormen Lange projects are completed, but high oil prices are expected to contribute to maintaining investment at a relatively high level throughout the projection period. The Government Pension Fund – Global, previously called the Government Petroleum Fund, will increase substantially in the years ahead. The fiscal rule entails a gradual phasing-in of petroleum revenues into the economy, approximately in pace with the expected real return on the Fund, which is estimated at 4 per cent. On the basis of our assumption in the March Inflation Report for developments in oil prices (oil futures prices), the fiscal rule allows for an increase in petroleum revenue spending of more than NOK 30 billion from 2006 to 2009. If the Norwegian economy continues to exhibit solid growth, it will nevertheless be in line with the fiscal guidelines specifying that petroleum revenue spending is lower than the expected real return for a few years.