House prices increased by an average of 8.3 percent in 2016 compared to the previous year, the biggest annual increase ever.
Additionally, property prices were 12.8 percent higher in December 2016 than December 2015, the biggest growth rate for any 12-month period ever.
That record was due in part to prices increasing by a season-adjusted 1.1 percent in December, the first time that the month's final year has seen a price increase since 2003.
“Hardly any areas experienced price declines, which is unusual because housing prices usually fall in December,” said Real Estate Norway CEO Christian Dreyer.
At the beginning of 2016, Real Estate Norway predicted that prices would increase by only 5.3 percent during the year.
“We completely missed the mark and underestimated the power of the Norwegian economy,” Dreyer told NTB.
He said that the historic price increases were the result of falling unemployment, historically low interest rates and record strong purchasing power. The increase has been by far the largest in the Oslo area, with price growth of a whopping 23.3 percent.
“People have invested in housing to a far greater extent than we expected,” he said, adding that population growth in the capital has outpaced supply.
In addition, few experts predicted that so many so-called hobby investors would buy their second and third properties, often on behalf of their children.
“The large number of older adults who have gone after smaller apartments downtown is something we have not experienced before. It has contributed big time to the pressure, especially in the second half of the year,” he said.
Dreyer predicted that the housing market's strong performance would continue in the first months in 2017 despite the fact that the government has tightened the requirements for purchasing secondary residences in Oslo, including a mandatory 40 percent down payment.
“In the short term, the measures will have quite a small effect. Those who will buy housing in the first months will do it on the basis of financing approval that they have received from banks before Christmas. The banks will probably stand by them. Eventually though, these tighter requirements will take effect but just how big their impact will be is uncertain,” he said.
Real Estate Norway predicts a flattening in housing prices in the second and third quarters of this year and a better balance between housing supply and demand in large parts of the country.
For the country as a whole, Dreyer forecasts a housing price increase of between 9 and 11 percent in 2017 and doesn't think prices will fall for a number of years.
Others believe the market will grow even faster this year, especially in Oslo. Grethe Meier, the CEO at estate manager Privatmegleren said the new regulations would do little to dampen the interest to buy property in the capital and said prices are likely to increase by an additional 15 percent in the city.