House prices in Oslo have increased 21 percent in one year. Photo: Terje Pedersen / NTB scanpix
“The property price developments in October are historically strong. The price increase in Oslo of 1.8 percent is a record high for the month, as house prices normally drop in October,” Christian Vammervold Dreyer, the CEO of Real Estate Norway, said.
He says the housing market’s strong performance also applies to Central Norway and Northern Norway.
The biggest October price jumps were in Oslo and Drammen, with increases of 1.8 and 1.2 percent respectively. The weakest market developments were in Haugesund and Sandnes, where prices fell by 0.7 percent.
Real Estate Norway said that the increasing house prices are cause for great concern, particularly in Oslo where prices have increased 21.7 percent in just one year. Drammen isn’t far behind, with prices increasing 16 percent over the past 12 months.
Dreyer cautioned that the price increases are nothing to cheer about.
“There are now a record number of property investment buyers in Oslo who are not professional investors. That so many ordinary people are buying property just because they expect further price increases gives cause for concern,” he said.
Dreyer said that price increases lead to an increasingly higher debt ratio in households and that those who are banking on continued price increases are due to be hit by a market price correction sooner or later.
“If you enter the market eyeing an investment now, you have to be aware that there may be a price correction. And when it comes, it’s not certain that the investment will be so profitable,” he said.
The Property Norway CEO said the steady increases are make purchasing a home very difficult for first-time buyers.
“It must be terribly frustrating. You work hard to reach the capital requirements and then you see that house prices are running away from you every single month. First-time buyers who do not have access to what we call ‘the family bank’ will have great difficulty entering the housing market as it is now,” Dreyer said.
Compounding the problem is that there are relatively few homes available on the market.
In total, 7,734 homes were sold nationwide in October, a sharp decline from the previous month when 9,352 houses sold.
“We need to go back to 2010 to find a month of October with fewer sales than this year. The supply side has been lower than average across the country,” Dreyer said.
At the end of October there were 12,130 homes for sale nationwide, 14.9 percent fewer than a year ago.