Real house prices have almost trebled. The rise in house prices has been considerably stronger than earlier and has spanned a long period. With the exception of a few months in 2003, house prices have risen continuously since 1992. This is the second longest period of rising real prices since 1819. Statistics for earlier years do not exist. 8  BIS Review 28/2007  Norway is not the only country where house prices have shown a strong rise over a long period. House price inflation has been particularly high in Ireland and the Netherlands, but Denmark, the UK and Spain also stand out. The countries where house price inflation has been high are the same countries where economic growth has been strongest. Since prices are rising in tandem in many countries, it is natural to look for common driving forces. With increasing cross-border flows of intermediate goods, capital and increasingly so labour, prices will largely reflect growth and competition in the global economy. If capital or labour becomes too expensive in one country, businesses can relocate production. Prices for fixed factors of production, such as property, will on the other hand reflect income developments in different countries. Consequently, the rise in property prices will tend to be highest in those countries where income growth is highest. BIS Review 28/2007  9  External and domestic interest rates are low in an environment of solid growth. Long-term interest rates have fallen sharply both in nominal and real terms since the beginning of the 1990s.

Ladies and Gentlemen, Moving forward, consumer and SME financing will continue to be two important areas of growth. The overall macroeconomic and interest rate environment would continue to be supportive of growth in these two sectors. The challenge for banking institutions is to ensure that consumers and the businesses have access to a wide range of products, while at the same time ensuring that the necessary infrastructure is in place to manage risks arising from these businesses. This is to ensure that lending to these sectors would be sustainable and avoid the risks that have recently been experienced in a number of other countries in this region. While focusing on consumer and SME financing, banking institutions should also recognise the emergence of a number of new growth sectors in the economy, including activities in the services sector, and the agriculture and agro-based industries. These areas represent opportunities that can be capitalised upon by the banking institutions. While these may be viewed as non-traditional areas, banking institutions that introduce new lending models and products to cater to the financial requirements of these areas would have the early advantage in capitalising the potential of these new markets. In this regard, the main theme of this year's dialogue, is "Tapping Opportunities in the New Growth Areas - Fostering Best Lending Practices", for discussion by the banking community. We are very pleased to have four distinguished speakers to share with us their expertise and experiences in building successful and sustainable portfolios in consumer lending, SME financing, microcredit and agriculture financing.