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Five things that are becoming more expensive in Norway (and why)

Consumers in Norway are feeling the pinch due to rising expenses, with the cost of everyday essentials likely to increase further.

Five things that are becoming more expensive in Norway (and why)
Here are five things becoming more expensive in Norway. Pictured is somebody holding some 500 kroner notes. Photo by Nils S. Aasheim/Norges Bank on Flickr.

Norwegian consumers are experiencing increasing costs of living, with goods and essentials becomings more expensive. Factors in the trend include the price of fuel, economic impact of Covid-19, supply chain issues caused by the pandemic, rising raw material and commodity costs, new government policy and more. 

Electricity bills

For those living in the north of the country, you can breathe a sigh of relief because this hasn’t affected you to the same extent as those in the south. 

Energy price records in southern parts of the country have been continually set since the end of summer, and the trend has continued into the autumn. 

Prices have soared due to a combination of record exports to the continent and a dry summer, which has led to low hydroelectric stocks in reservoirs. 

To make matters worse, prices will be expected to continue rising throughout the winter as more people will be using energy to heat their homes.

Raw energy costs for a house that uses around 20,000 kWh of energy each year could reach 6,500 kroner for the last three months of the year, Nettavisen reported earlier this month based on comments from Tor Reier Lilleholt, head of analysis at Volue Insight AS. The price billpayers will fork out will be even higher when accounting for taxes, grid rent and surcharges. 

Heading into next year, the picture is similarly bleak, with Lilleholt predicting the total energy bill for a house that consumes around 20,000 kWh each year could come in anywhere between 30,000- 40,000 kroner when considering all fees, such as taxes and grid rent.

Petrol and diesel

Norway’s fuel prices have been steadily going up in line with global oil market prices, which have doubled from around 40 dollars a barrel to about 85 dollars a barrel over the past year. 

The average price per litre for petrol in Norway was 18.14 kroner in Norway between July and October, according to GlobalPetrolPrices.com

Much like electricity, this cost will only get greater should a proposed change to diesel and petrol tax, outlined by the previous government in the proposed state budget for 2022, get the green light from the new administration. 

An increase of 41 øre from 1.37 kroner to 1.78 kroner per litre has been proposed for petrol. This will not be offset with a cut to road tax, as has been the case with other petrol tax hikes in the past. 

It’s not just petrol taxes getting pumped. Diesel will also see a tax increase of almost 30 percent. The CO2 tax on diesel will rise from 1.58 kroner per litre to 2.05 kroner.

READ MORE: How Norway’s proposed state budget for 2022 could affect your finances

Home renovations

Home improvements in Norway, especially for work where a professional is required, such as plumbing, can cost a small fortune. 

The price of timber has gone up 65 percent over the past year, according to Statistics Norway’s construction costs index

Several factors have caused prices to rise. These include extensive bark beetle outbreaks in Canada and across Europe, which has led to a worldwide shortage of timber.

The shortage has been exacerbated by increased demand in Norway and knock-on effects of the coronavirus pandemic. 

“The reason for the price increase is first and foremost an imbalance between supply and demand and strong competition in international markets,” Heidi Finstad, administrative director of Treindustrien, which represents the wood and timber industry in Norway, told public broadcaster NRK in September. 

Unlike with petrol and energy, though, good news appears to be on the horizon as prices are expected to stabilise in the future once things return to normal in the global timber market. 

READ MORE: Why the cost of home renovations in Norway is rising

Shopping

Grocery bills will also be on the up in the near future. Suppliers and supermarkets say the rising costs of raw materials used to make and package food going up means that they have been left with little choice but to consider putting prices up. 

Sugar, vegetable oil, rapeseed oil and plastic and aluminium, used to package food, have increased significantly over the past year. 

In addition, issues with the global supply chain and delivery have caused uncertainty in the food and drink sector. 

Orkla, Arga, Kiwi, Rignes are among the suppliers and supermarkets that have said that costs would, unfortunately, be passed to consumers. 

READ ALSO: Why food in Norway could become even more expensive

Mortgage and loan repayments

Interest rates will be going up steadily until 2024. This was inevitable after the historically low-interest rate of zero was introduced due to the Covid-19 pandemic. 

The current key interest rate rose from zero to 0.25 percent at the end of September, which may not seem like much, but works out at approximately 8,000 kroner per year more in repayments for a loan or mortgage worth around four million kroner. 

A number of banks and lenders have raised their rates above the key interest rate already. 

Rates will rise to 1.75 percent by 2024, the central bank, Norges Bank, has confirmed.

There are two silver linings to this increased cost, however. Firstly, it is a sign that the economy is recovering from Covid-19, and secondly, the interest rates could help stabilise rising house prices. This will benefit house-hunters looking to get on the property ladder. 

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MONEY

Exchange rate: What are your options if you live in Norway but have income in pound sterling?

The value of the British pound has fallen steeply against the dollar in recent days but also against the Euro – and the krone. So what should you do if you live in Norway but have income – such as a pension, rental income or a salary – in pound sterling?

Exchange rate: What are your options if you live in Norway but have income in pound sterling?

Exchange rates might sound like a spectacularly dull topic, but if you live in Norway (where, naturally, your day-to-day living expenses are paid in kroner) but have income from the UK in pounds, then the movement of the international currency markets will have a major impact on the money that ends up in your pocket.

This is not an uncommon situation – Norway-based Brits may work remotely as freelancers from British companies and be paid for invoices in pounds, while retired Brits might be receiving a British pension.

Others might have income from rental properties or investments.

So a big loss in the value of the pound against the euro – and by extension, the krone – can have a major impact on Brits in Norway.

The most recent fall in the value of the pound was sparked by the UK government’s new mini budget and has already seen a relative recovery. 

But while this one-time fall is spectacular, it’s also part of a longer-term trend in the fall of the value of the pound, especially since Brexit, that has seen people such as foreign-based pensioners lose a big chunk of their income.

So if you have income in pounds, what are your options?

Income in kroner – obviously, this isn’t an option for everyone, especially pensioners, but the best way to protect against currency exchange shocks is to make sure that you’re paid in the same currency that you spend in.

While the krone is traditionally weak against the pound, it is known as a safe and stable currency as Norway has no net debt, and the Norwegian krone isn’t pegged to another currency. 

Alternatively, income in euros: the advantage of the euro is that for those being paid from abroad, billing in euros means you could work in any EU country – including the anglophone ones like Ireland – and get your salary in euros.

Depending on your employer, it might also be possible for you to ask to bill in euros. 

Work in Norway – if you’re currently not working or want to switch to local currency income, then an obvious option is to take up some work in Norway.

Depending on your work and residency status, as well as the field you work, the practicality of this option ranges wildly from one person to the next.

READ ALSO: What is Norway’s job market like for foreigners at the moment?

Exchange rate – if your income can only be paid in pounds, it’s crucial to ensure that you get the best exchange rate possible and that you don’t waste money on international transfer fees.

The best options here are online banks or money transfer services, which compete on the rates that they offer, so usually have the most advantageous rate.

Some online banks also have the option to set up accounts in both pounds and kroner, so that you can receive money in pounds and spend it in kroner without having to make bank transfers, which can attract fees.

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