Young people to struggle in the Norwegian housing market despite price dip
Norwegian house prices continued to fall in July, following an earlier slump in June, figures from Real Estate Norway show. However, things will be challenging for young buyers.
House prices in Norway fell by 1.1 percent in July, the latest figures from Real Estate Norway show. The fall comes after house prices decreased by 1.2 percent the previous month.
Still, house prices in Norway have increased by 5.2 percent overall this year. The average cost of a home in Norway was 3.94 million kroner at the end of July.
Despite prices falling nationally, there were quite large differences between cities. House prices rose by 1.4 percent in Stavanger when adjusted for seasonal variation. Prices increased marginally in Oslo and fell by 3.1 percent and 2.3 percent in Bergen and Trondheim.
So far this year house prices have risen 9.9 percent in Stavanger, which is more than in Bergen, Trondheim and Oslo. House prices have also risen significantly in Kristiansand.
Henning Lauridsen, CEO of Real Estate Norway, has said that moving forward, Norges Bank should keep interest rates steady following a double rate hike in June.
"The interest rate works with a significant delay in the economy, and the weak new home sales in the past year is a warning of weaker development in the Norwegian economy going forward," Lauridsen said.
However, Chief economist Sara Midtgaard at Handelsbanken told business news publication E24 that the central bank wouldn't likely be deterred in its plans to raise rates.
"It will probably not change Norges Bank's interest rate plans, but I will be surprised if we get a strong housing market in the autumn. Then we will see more clearly that the market is cooling down," she said.
The Norwegian Association of Real Estate Agents (NEF) has said that even though has said that despite falling house prices, conditions are particularly tough for young people at the moment.
"With high interest rates and high prices, more young people will struggle to buy their first home this autumn. It will contribute to increased pressure on the rental market, which is already under pressure from a record high number of students and a high number of Ukrainian refugees," CEO Carl Geving of the NEF said of the current market.
He explained to E24 that house prices in Oslo were less sensitive to interest rate raises than expected.
"There is much to suggest that Oslo should have been more sensitive to interest rates and reacted more negatively to higher interest rates, but so far, it seems that the low supply of housing is helping to maintain a strong price trend," he said.
Higher interest rates are making it harder for prospective buyers to obtain mortgages, however, without slowing down price development. This means prices remain high as mortgages become harder to obtain.
Geving did say that in Oslo, at least, the price trend would begin to weaken heading into the autumn.
"We expect that this effect (low supply keeping prices high) will persist until August and perhaps extend into September before the price trend weakens," he said.
Analyst Marte Herje Strømme told public broadcaster NRK that young people in Oslo are particularly affected by interest rate increases.
"Oslo has a younger population, and a younger population often has a higher debt ratio, which is also more affected by interest rate increases than the rest of the population," she said.,
She told NRK that house prices would be lower, but people shouldn't expect a drastic dropoff.
"But I think there is a danger that we will not see too much of a drop in prices, considering that we still have a very strong economy in general and a strong labour market for so long. So before anything significant happens there, I think we can be surprised on the upside in the future as well," she said.
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House prices in Norway fell by 1.1 percent in July, the latest figures from Real Estate Norway show. The fall comes after house prices decreased by 1.2 percent the previous month.
Still, house prices in Norway have increased by 5.2 percent overall this year. The average cost of a home in Norway was 3.94 million kroner at the end of July.
Despite prices falling nationally, there were quite large differences between cities. House prices rose by 1.4 percent in Stavanger when adjusted for seasonal variation. Prices increased marginally in Oslo and fell by 3.1 percent and 2.3 percent in Bergen and Trondheim.
So far this year house prices have risen 9.9 percent in Stavanger, which is more than in Bergen, Trondheim and Oslo. House prices have also risen significantly in Kristiansand.
Henning Lauridsen, CEO of Real Estate Norway, has said that moving forward, Norges Bank should keep interest rates steady following a double rate hike in June.
"The interest rate works with a significant delay in the economy, and the weak new home sales in the past year is a warning of weaker development in the Norwegian economy going forward," Lauridsen said.
However, Chief economist Sara Midtgaard at Handelsbanken told business news publication E24 that the central bank wouldn't likely be deterred in its plans to raise rates.
"It will probably not change Norges Bank's interest rate plans, but I will be surprised if we get a strong housing market in the autumn. Then we will see more clearly that the market is cooling down," she said.
The Norwegian Association of Real Estate Agents (NEF) has said that even though has said that despite falling house prices, conditions are particularly tough for young people at the moment.
"With high interest rates and high prices, more young people will struggle to buy their first home this autumn. It will contribute to increased pressure on the rental market, which is already under pressure from a record high number of students and a high number of Ukrainian refugees," CEO Carl Geving of the NEF said of the current market.
He explained to E24 that house prices in Oslo were less sensitive to interest rate raises than expected.
"There is much to suggest that Oslo should have been more sensitive to interest rates and reacted more negatively to higher interest rates, but so far, it seems that the low supply of housing is helping to maintain a strong price trend," he said.
Higher interest rates are making it harder for prospective buyers to obtain mortgages, however, without slowing down price development. This means prices remain high as mortgages become harder to obtain.
Geving did say that in Oslo, at least, the price trend would begin to weaken heading into the autumn.
"We expect that this effect (low supply keeping prices high) will persist until August and perhaps extend into September before the price trend weakens," he said.
Analyst Marte Herje Strømme told public broadcaster NRK that young people in Oslo are particularly affected by interest rate increases.
"Oslo has a younger population, and a younger population often has a higher debt ratio, which is also more affected by interest rate increases than the rest of the population," she said.,
She told NRK that house prices would be lower, but people shouldn't expect a drastic dropoff.
"But I think there is a danger that we will not see too much of a drop in prices, considering that we still have a very strong economy in general and a strong labour market for so long. So before anything significant happens there, I think we can be surprised on the upside in the future as well," she said.
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