Is the outlook for Norway's property market looking rosier after price rises?
Recent housing price statistics have seen many experts rethink where Norway's real estate market is heading. We spoke to industry experts to find out if the future is looking a little less gloomy.
Norwegian real estate prices have been quite volatile over the last 12 months. However, up to February, the prevailing consensus among analysts seemed to be that the Norwegian Central Bank's interest rate hikes were effective in "cooling down" prices.
Then, on March 3rd, Real Estate Norway (Eindom Norway) published the most recent housing price figures. They showed that housing prices in Norway rose by 1.5 percent in February 2023. Furthermore, the figures showed that housing prices in the country had risen by 4.5 percent since the turn of the year.
READ MORE: Have Norwegian house prices bottomed out?
An unexpected upswing
The upswing in prices came as a surprise to both industry analysts and people who are in the market for a new home. The price development so far this year has been stronger than Eiendom Norge had envisaged in its forecasts before the New Year.
However, the organisation thinks housing price growth would have been stronger without the frequent interest rate increases last year.
"There has been an interest rate effect on housing price developments, and we see that in the twelve-month (price) growth... But so far this year, the interest rate effect has been much weaker than we had expected," Eiendom Norge head Henning Lauridsen told the news bureau NTB on March 3rd.
This unexpected turn of events has, understandably, raised a lot of questions among would-be homeowners, who were expecting to see continued price decreases in the months ahead.
With the latest figures in mind, what should prospective buyers expect in the first part of 2023? Which factors will continue affecting prices in the short and mid-term, and will the supply side of housing improve as the year moves closer to an end?
In this article, The Local looks at new forecasts and talks to real estate industry experts to find out more about the current market situation and its future outlook.
Current market situation and future outlook
Real Estate Norway's new forecast now predicts a fall in prices in the spring and a price level at the end of the year below the current one, as it expects the Central Bank to raise the key interest rate two more times this year.
"We base this (prediction) on the very strong development in the Norwegian economy and the fact that inflation remains high," Lauridsen explained.
Some commentators pointed out that the recent housing price figures show a low risk of a significant downturn in the Norwegian housing market. According to senior economist Kyrre Aamdal at DNB Markets, the price developments in February show that households in the country are better equipped to handle higher loan rates than Norges Bank assumed.
Meanwhile, experts The Local has talked to agree that supply challenges, particularly new builds, will continue to affect prices.
"We assess that the number of new (housing) projects to be presented into the market will be low for the next 12 months," CEO of the real estate firm Nordvik, Martin Kiligitto, told The Local, noting that second-hand homes are the best option for those "in dire need of finding a place to live," who can't afford to wait around for the supply of new apartments to improve," Kiligitto noted.
A more optimistic - but also more selective - market?
Nordvik's CEO also shared some of the latest impressions and observations of the company's real estate brokers.
"Both January and February have been good sales months. The number of people at viewings for the homes we are selling has also risen sharply. The brokers report that the interested parties have done thorough research before submitting bids. About the home, the area, faults or deficiencies, electricity and energy costs, rent and more.
"The market is also generally more optimistic but also selective. We feel there is less uncertainty, as several cost drivers (electricity, fuel, interest, etc.) have stabilised, which provides predictability. Although it has been a good January and February, we see at the same time that the bidding rounds are moderate, and there are no galloping prices either. In other words, there is no housing bonanza.
"But in the segment of small apartments, up to 5 million kroner, in the centre of Oslo, our data shows that the number of interested parties and bids is rising. The reason is twofold: many people can afford to submit bids, and there are too few homes in this segment in total. The result is an increase in price," Kiligitto concluded.
Fredrik Søreide, the CEO of the real estate company Kaland&Partners, told The Local that he expects to see a stabilisation of market conditions in the mid-term.
"I think market conditions will normalise in the following months… The interest rate will go up another one or two times, and then stop. Private buyers are affected by the overall inflation – especially when it comes to food, fuel, and electricity – however, there are still too few properties for sale in the bigger cities, and there is an increase in the number of people moving to the cities. It's important that we see new construction projects next year," Søreide noted.
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Norwegian real estate prices have been quite volatile over the last 12 months. However, up to February, the prevailing consensus among analysts seemed to be that the Norwegian Central Bank's interest rate hikes were effective in "cooling down" prices.
Then, on March 3rd, Real Estate Norway (Eindom Norway) published the most recent housing price figures. They showed that housing prices in Norway rose by 1.5 percent in February 2023. Furthermore, the figures showed that housing prices in the country had risen by 4.5 percent since the turn of the year.
READ MORE: Have Norwegian house prices bottomed out?
An unexpected upswing
The upswing in prices came as a surprise to both industry analysts and people who are in the market for a new home. The price development so far this year has been stronger than Eiendom Norge had envisaged in its forecasts before the New Year.
However, the organisation thinks housing price growth would have been stronger without the frequent interest rate increases last year.
"There has been an interest rate effect on housing price developments, and we see that in the twelve-month (price) growth... But so far this year, the interest rate effect has been much weaker than we had expected," Eiendom Norge head Henning Lauridsen told the news bureau NTB on March 3rd.
This unexpected turn of events has, understandably, raised a lot of questions among would-be homeowners, who were expecting to see continued price decreases in the months ahead.
With the latest figures in mind, what should prospective buyers expect in the first part of 2023? Which factors will continue affecting prices in the short and mid-term, and will the supply side of housing improve as the year moves closer to an end?
In this article, The Local looks at new forecasts and talks to real estate industry experts to find out more about the current market situation and its future outlook.
Current market situation and future outlook
Real Estate Norway's new forecast now predicts a fall in prices in the spring and a price level at the end of the year below the current one, as it expects the Central Bank to raise the key interest rate two more times this year.
"We base this (prediction) on the very strong development in the Norwegian economy and the fact that inflation remains high," Lauridsen explained.
Some commentators pointed out that the recent housing price figures show a low risk of a significant downturn in the Norwegian housing market. According to senior economist Kyrre Aamdal at DNB Markets, the price developments in February show that households in the country are better equipped to handle higher loan rates than Norges Bank assumed.
Meanwhile, experts The Local has talked to agree that supply challenges, particularly new builds, will continue to affect prices.
"We assess that the number of new (housing) projects to be presented into the market will be low for the next 12 months," CEO of the real estate firm Nordvik, Martin Kiligitto, told The Local, noting that second-hand homes are the best option for those "in dire need of finding a place to live," who can't afford to wait around for the supply of new apartments to improve," Kiligitto noted.
A more optimistic - but also more selective - market?
Nordvik's CEO also shared some of the latest impressions and observations of the company's real estate brokers.
"Both January and February have been good sales months. The number of people at viewings for the homes we are selling has also risen sharply. The brokers report that the interested parties have done thorough research before submitting bids. About the home, the area, faults or deficiencies, electricity and energy costs, rent and more.
"The market is also generally more optimistic but also selective. We feel there is less uncertainty, as several cost drivers (electricity, fuel, interest, etc.) have stabilised, which provides predictability. Although it has been a good January and February, we see at the same time that the bidding rounds are moderate, and there are no galloping prices either. In other words, there is no housing bonanza.
"But in the segment of small apartments, up to 5 million kroner, in the centre of Oslo, our data shows that the number of interested parties and bids is rising. The reason is twofold: many people can afford to submit bids, and there are too few homes in this segment in total. The result is an increase in price," Kiligitto concluded.
Fredrik Søreide, the CEO of the real estate company Kaland&Partners, told The Local that he expects to see a stabilisation of market conditions in the mid-term.
"I think market conditions will normalise in the following months… The interest rate will go up another one or two times, and then stop. Private buyers are affected by the overall inflation – especially when it comes to food, fuel, and electricity – however, there are still too few properties for sale in the bigger cities, and there is an increase in the number of people moving to the cities. It's important that we see new construction projects next year," Søreide noted.
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