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RENTING

‘No quick fixes’: Gloomy forecast for Norway’s rental market

High demand and a shortage of properties has led to a tight rental market in Norway's big cities. The Local spoke to real estate experts to find out what needs to happen for the situation to change.

Pictured are wooden houses in Trondheim.
The rental market in Oslo and Stavanger in particular is very tight right now. The Local spoke to two experts on when we could see a change. Pictured are wooden houses in Trondheim.Photo by Maarten Zuidhoorn on Unsplash

After two years of the coronavirus pandemic, day-to-day life in Norway is – more or less – back to normal. 

While many young people and students in Norway are enjoying their reclaimed freedom of movement and lifestyle, the aftereffects of the pandemic continue to impact their lives, most notably when it comes to finding rental accommodation.

Financial newspaper Finansavisen recently reported that, at the end of June this year, there were 45 percent fewer rental properties on the market compared to 2021. 

The rental market is particularly tight in big cities like Oslo and Stavanger, and properties are being rented out much faster than last year

Are there any signs that the situation will improve in the coming months?

A demand crisis in Oslo and Stavanger

As things now stand, those looking to rent in Norway are in for a rough time.

“The demand for rental properties was lower than usual during the pandemic. At the same time, house prices in Norway rose. We believe that quite a few people used the opportunity to sell their rental homes at the time. 

“After the pandemic, all the students and people working in Norway (for example, workers from Sweden and Poland, as some of them went home during the pandemic) have largely returned to the cities. 

“So, demand is very high, we have a demand crisis in some areas – especially Oslo and Stavanger. However, many places in Norway don’t have such a problem; it’s mainly the case in big cities,” real-estate industry veteran and director at Real Estate Norway Henning Lauridsen told The Local.

Fewer second homes

Carl O. Geving, Managing Director at Norway’s Real Estate Association (NEF), agrees with Lauridsen. He also points out that, during the pandemic, there has been a decrease in the number of second homes in Norway – homes that are usually rented out.

“We see increasing demand in the rental market, that is correct. The market is very tight, especially in Oslo, because of the lack of possibilities to rent apartments. 

“The number of second homes for rent in Oslo has decreased from 59,000 to 54,000 since 2019. So, in Oslo, it is quite difficult to find an apartment for rent – the fact that the construction of small apartments in the capital is limited, the tax framework, and the decrease in the number of investors in construction projects also make the situation worse,” Geving said in a phone call with The Local.

No quick fixes

In the short term, industry experts see only dark clouds on the horizon for people looking to rent in Norway’s major cities.

“It will take some time for the situation to change. The lack of housing in Oslo results from insufficient development over 15-20 years. However, in Stavanger, the situation may improve in six months or a year. Overall, it’s pretty difficult at the moment; there is no easy solution,” Lauridsen stated.

Geving agrees: “There are no quick fixes. With the current tax system, it’s difficult for things to change fast. If we get a price correction in the buyers’ market, we will likely have even fewer second homes. Norwegian authorities are trying to help to get more people to rent, but that also takes time.”

Thus, the rental market squeeze in large cities seems to be here to stay. 

Is there anything people looking for rental housing can do to adapt? The Director of Real Estate Norway believes people can try to look further away from where they initially wanted to rent. 

“That could be a possibility. But it will be difficult,” Lauridsen noted.

On the other hand, Geving thinks that buying properties together with friends – a practice common in parts of Norway – could be part of the solution.

“We can see that, in tough times, more people try to buy properties together with friends, it becomes more common. 

“Still, it’s challenging. Students and young people have limited capital, typically. In previous years when we had this debate, students and young people managed to get by, but the market is more crowded this year. Thus, some people will likely choose to live outside Oslo in the surrounding municipalities and travel to the capital via train or bus.

“The problem is less serious in Bergen and Trondheim, but in Oslo, it’s quite tough,” Geving pointed out, adding that building more student homes in the capital could also be part of the solution.

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PROPERTY

Property latest: What’s the outlook for Norway’s housing market this Autumn?

As is the case in most of Europe, Norway's housing market is currently characterized by a lot of uncertainty. However, housing prices in the country are expected to fall this Autumn due to – among other things - cyclical patterns and the effect of rising interest rates.

Property latest: What's the outlook for Norway's housing market this Autumn?

After a year of rising housing prices in Norway, the market is starting to cool off a little. According to the latest Real Estate Norway data, house prices fell by 2.2 percent in September. Adjusted for seasonal variations, prices fell by 0.6 percent.

However, it is important not to overstate the decrease, as home prices in Norway are cyclical – they’re traditionally lower in the Autumn and Winter.

While the COVID-19 pandemic has left a mark on the real estate market, most experts still agree that falling prices should be the norm in October, November, and December.

This Autumn, price developments will also be characterized by a considerable level of uncertainty as the energy, security, and inflation crises continue to grip Norway, Scandinavia, and the Old Continent.

Housing market snapshot

Wondering how many homes are sold or how many homes are put for sale on the market each month? Curious about the average price and sale time for a home in Norway at the moment?

We’ve got you covered.

In September, 9,798 homes were sold in Norway, a 5.6 percent decrease compared to the corresponding month in 2021. At the same time, 11,716 homes were listed for sale, which is 17.3 percent more than in September 2021.

Furthermore, it took an average of 29 days to sell a home last month, according to Real Estate Norway.

The September statistics show that the number of properties on the market has registered a robust increase, while home sales have leveled off.

This points to a potentially lower home price trend in the months ahead.

Interest rate hikes

The fact that price developments in September were relatively weak in virtually all parts of the country – with the exception of Ålesund and the surrounding area – could indicate that the Central Bank’s (Norges Bank) interest rate hikes are beginning to work.

There are also other signals that Norway’s economy has started taking note of the monetary tools at Norges Bank’s disposal and broader crisis-related factors.

In its Tuesday forecast, the Confederation of Norwegian Enterprise (NHO) announced that unemployment in Norway is set to increase in the months ahead as the economy continues to be affected by a shortage of goods, raw materials, and energy.

As activity levels in the Norwegian economy decline, growth in the workforce will likely level off.

The Norwegian economy is booming at the moment, but should this development reverse, it would also likely negatively affect housing prices in the short term.

Change expected in January

If prices continue to follow seasonal trends, expect to see them rise again from January due to the lack of properties on the market and as buyer interest starts growing.

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