In July, the ongoing decline in housing prices that commenced in June persisted, according to the price statistics from Eiendom Norge. However, after adjusting for seasonal variations, a slight increase in housing prices was observed. Experts are somewhat surprised by this adjusted rise and speculate that the downward trend might continue into the autumn.

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Housing Price Development in July

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The statistics show that housing prices fell by 1.1% in July. However, the seasonally adjusted prices went up a little by 0.2%. By the end of July, the average price for a house in Norway was 3.95 million, down from 4.65 million at the end of the previous month.

This is the second recorded housing price decline since December last year. In June, prices dropped 1.2% after going up 7.7% from the beginning of the year until May. After the July figures, housing prices have gone up by 5.2% so far this year.

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According to Henning Lauridsen, the CEO of Eiendom Norge, there were significant regional variations in housing price development in July:

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·      In Kristiansand, prices went up 1.5%, followed by Stavanger and surrounding areas with a 1.4% increase.Both these cities also have the highest price increase in 2023, with 10.7% and9.9% respectively.

·      In Oslo, there was also a robust growth with a seasonally adjusted increase of 0.5%.

·      The weakest price development was in Bergen, with a drop of 2.9%.  

·      Housing prices also fell in Trondheim and Tromsø by 0.4% and 0.5%, respectively. Tromsø has alsothe weakest price development this year, at only 0.7%.

Significant variations in the housing price development can be attributed to the fact that July is generally a month with few transactions and low activity. The CEO of Eiendom Norge points out that the strong development in Kristiansand and Stavanger, as well as the robust growth in Oslo, have boosted the national price trend. Lauridsen explains that the strong growth in Kristiansand and Stavanger may be due to increased business activity and weak price growth in these areas over recent years. He also hints that low housing construction might be pushing prices up in Oslo.

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Despite the weak price development, lots of houses are still being sold across Norway, according to the CEO of Eiendom Norge. The used home market was busier in July this year compared to last year:

·      4,134 homes were sold, 1.6% more than in the same month in 2022.

·      3,667 homes were put up for sale, 13.8% more than the same month last year.

So far this year, there has been high activity in the housing market. Across the country, 54,908 homes have been sold, 2.1% more than the same period last year. Also, 60,451 homes have been put up for sale, 5.7% more than the same period in 2022.

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Summer's Price Drop Might Continue

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The seasonal rise in housing prices was somewhat unexpected for experts. Senior economist Sara Midtgaard at Handelsbanken finds it surprising that the housing market stays strong even with all the interest rate hikes from the Bank of Norway. She warns that the July figures should not be overinterpreted due to the limited number of real estate transactions, and mentions that the number of unsold houses is nearly at a record high for July. She predicts this could lead to more significant drops in housing prices in the autumn.

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Similarly, Kjetil Martinsen, the chief economist at Swedbank, thinks that housing prices might cool down in the coming time. The seasonal increase in July surprised him because the number of homes for sale indicated that there could have been a seasonally adjusted decrease. He suggests that prices might stay strong because new home sales have slowed down, moving some sales to used homes. However, he sees the market balance getting worse, pointing to a likely fall in adjusted prices.

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Property Norway also anticipates a weaker trend in housing prices going forward.

- It's common for housing prices to rise significantly in August, but the double interest rate hike in June will affect the banks' lending rates in August, which might push prices down, says Lauridsen.

In June, the Norwegian Central Bank raised the interest rate to 3.75%, the highest since the financial crisis in 2008. They also plan to top it at 4.25% in the autumn. Marte Herje Strømme from the Forecast Center points out that the Bank of Norway's decision will determine the future trajectory of the housing market. Additionally, the labor market will affect housing prices. "If unemployment increases in several industries throughout the autumn, it could affect the housing market by having fewer people participating in bidding rounds," she says.

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Sources: Eiendom Norge, DN, E24