Could looser regulations combat rising rents in Norway?

Rents prices are rising fast in Norway, with the cost of being a tenant in Oslo now 12 percent more expensive than a year ago, according to figures from the ad-listing site Finn.no.

Nationally, rent prices have increased 7.4 percent between the second quarter of last year and now, figures from the rental agency Husleie show. Inflation in Norway is currently at 6.7 percent. 

Higher interest rates are making it harder to obtain a mortgage for a house, meaning that more people are choosing to rent. In the first quarter of 2023, a record-low number of first-time buyers were registered.

Compared to a market peak, there are also around 9,000 fewer properties available to tenants compared to 2019.

"Both apartments, studios and house shares have increased in price, and apartments are experiencing the highest price increase from last year. In addition, there are fewer homes on the market," Jørgen Hellestveit, from Finn.no's property section, told Norwegian newswire NTB.

Increasing rents and fewer available properties mean students are heavily affected by current market conditions.

This development has the leader of the Norwegian Student Organisation (NSO) concerned.

"When rental prices rise and thus eat up an even larger part of the budget, I am worried whether we will be able to afford other necessary expenses," Oline Sæther, leader of the NSO,  said.

The Norwegian Association of Estate Agents said that property tax on primary and secondary homes leads to fewer available rental homes.

Sæther called for tighter tenant laws in Norway. She also proposed a rent cap, something which the Norwegian government has previously ruled out to The Local.

READ ALSO: Norway’s government rules out a temporary rent cap

Meanwhile, Real Estate Norway (Eindom Norge) says the government must scrap current lending regulations.

"Finance Minister Trygve Magnus Slagsvold Vedum must cancel the lending regulation now, as the interest rate is enough to control the growth of debt. Now lending regulation primarily causes damage," Henning Lauridsen, managing director of Real Estate Norway, told NTB.

At the beginning of this year, the government introduced looser regulations. The government changed the rules so that banks only stress-tested mortgage applicants' finances against interest rate rises of three percent rather than five percent.

Additionally, the equity required to purchase a second home in Oslo was reduced from 40 percent to 15 percent. This, in theory, makes it easier for people to buy properties to rent out.

The Financial Supervisory Authority, responsible for advising the government on lending regulations, actually called for the rules to be tighter last autumn.

Meanwhile, the Norwegian Consumer Council has also warned against removing the current lending regulations.

Research conducted by Oslo Economics on behalf of the consumer rights watchdog found that removing regulation would lead to higher house prices and increased financial vulnerability for homeowners.