According to the Housing Producers' Association, the first half of 2023 is the weakest first half in sales and the commencement of new housing construction. Additionally, Eiendom Norge's rental housing price statistics persist in indicating an upward trend in rental prices in the second quarter of 2023.
The figures from the Housing Producers' Association reveal that sales and commencement of new housing in the first half of 2023 are clearly lower than in the same period in 2022:
• In the first half, 6,945 housing units were sold, which is 39 percent lower than the same period last year. Sales per housing type so far this year show that the number of sold detached houses is 32 percent below, small houses are 24 percent below, and apartments are 46 percent below the same period in 2022.
• 8,138 housing units have been commenced, which is 43 percent lower compared to the corresponding period in 2022. Commencement per housing type shows that the number of commenced detached houses is 22 percent lower, small houses are 42 percent lower, and apartments are 52 percent lower than in the same month last year.
According to CEO Lars Jacob Hiim of the Housing Producers' Association, they have not measured a weaker first half in sales and commencement of new housing. Hiim points out that the annual average housing need is 29,384 housing units. The weak sales and commencement of new housing in the first half will therefore negatively impact future housing supply and the Norwegian housing model. The head of the Housing Producers emphasizes the need for quicker and more predictable planning and building processes and the need for measures so that the decline in the new housing market does not persist.
June figures indicate that new housing sales continued to decline. In comparison, the sale of new housing in June 2023 is 20 percent lower than in the same month in 2022. However, it is positive that we observe a slight increase in the commencement of new housing in June. Compared to June last year, the commencement increased by 14 percent. Nevertheless, this is the second weakest commencement the Housing Producers have measured in June.
Sales and commencement of new housing in the last twelve-month period are also lower than in the previous twelve-month period:
• The total number of sold new housing in the last twelve-month period is 14,953 housing units, which is 37 percent lower than the previous twelve-month period.
• The total number of commenced new housing in the last twelve-month period is 18,557 housing units, which is 27 percent lower than the previous twelve-month period.
The market for new holiday homes is also declining, with 56 percent fewer sold holiday homes in the first half compared to last year. So far this year, the number of commenced new holiday homes is 39 percent lower than the same period in 2022.
Each quarter, Eiendom Norge publishes rental housing price statistics in collaboration with Eiendom Norge, Eiendomsverdi AS, FINN, and professional rental actors. The statistics cover four areas: Oslo, Bergen, Trondheim, and the Stavanger and Sandnes region.
In the second quarter, rental prices continued to increase in the four major cities, with an increase of 1.7 percent. The price increase is, however, lower than in the first quarter, when rental prices rose by 4.4 percent, and lower than in the same period in 2022, when there was an increase of 2.7 percent. Overall, rental prices have climbed 9.3 percent during the year.
The strongest development in the second quarter was in the Stavanger and Sandnes region, with an increase of 11.2 percent. In Trondheim and Oslo, rental prices rose by 1.6 percent and 1.5 percent, respectively. Bergen differed from the other major cities with a decrease of 1.7 percent in rental prices. In the second quarter of this year, it cost an average of 17,633 kroner to rent an apartment in Oslo, 16,320 kroner in Trondheim, 15,880 kroner in Bergen, and 15,309 kroner in Stavanger/Sandnes.
Over the last year, the surge in rental prices has been historically strong. The increase has been greatest in Stavanger and Sandnes at 13.2 percent. Oslo has also taken a prominent role in driving price dynamics, with an increase of 10.1 percent. In Trondheim and Bergen, rental price growth over the past year has been more moderate at 5.3 and 4.2 percent, respectively.
Managing Director Henning Lauridsen of Eiendom Norge points out that the strong development in Stavanger and Sandnes can largely be attributed to the oil crisis that hit the region in 2014.
- The oil crisis led to a remarkable decrease in housing and rental prices, and now we are back to a more normal level. This results in a strong growth in rental prices, Lauridsen says.
Eiendom Norge expects that rental prices will continue to increase as the demand for rental housing is strong, partly due to the influx of refugees from Ukraine. Additionally, there has been a sharp decline in rental offerings in recent years.
The number of homes for rent on Finn.no in the major cities at the end of the second quarter is 2867, of which 1404 are in Oslo, 614 in Bergen, 552 in Trondheim, and 297 in Stavanger/Sandnes.
- Compared to before the pandemic, the rental offer in the major cities has been reduced, especially in Oslo and Stavanger/ Sandnes. Several of Eiendom Norge's members report that this is due to many selling their rental properties during the pandemic because of a weak rental market at that time, combined with increased wealth taxation of secondary housing and higher interest rates, Lauridsen says.
The third quarter is typically the quarter with the most activity in the rental market, according to the Eiendom Norge chief. That the rental offer is so low entering the third quarter may worsen the market balance, which could drive rental prices even higher.
Furthermore, Lauridsen believes that we risk a rental price inflation spiral because it is likely that many are now adjusting rents according to the consumer price index (CPI), which the rent law gives them the right to do every 12 months.
- Higher interest rates increase the return requirement for landlords, subsequently leading to increased rental prices. These rental increases, in turn, affect the Consumer Price Index (CPI), as rental prices practically constitute nearly one-fifth of the CPI. An elevated CPI results in higher interest rates, while simultaneously, the CPI and rental rates can mutually influence each other through the provision in the tenancy law to adjust rents according to the CPI, he explains.
The Eiendom Norge chief, therefore, urges the Norges Bank to be more cautious in interest rate setting.
- Otherwise, they may create the inflation they are supposed to combat, Lauridsen concludes.
In a time of reduced rental supply and significant growth in rental prices, we at Address hope that our rent-to-own program can help ease market imbalance by offering people the opportunity to rent their future homes and enter the housing market.
Sources: Eiendom Norge, Eiendomsverdi AS, NRK, Boligprodusentenes Forening
