On the third day of each month, Eiendom Norge publishes housing price statistics, compiled by Eiendomsverdi AS. The housing price statistics are a collaboration between Eiendom Norge, Eiendomsverdi, and FINN, and cover houses that are advertised on FINN, which make up about 70% of all used houses sold in Norway over a year.
According to the statistics, house prices fell 1.2% from May to June. Adjusted for seasonal variations, prices fell by 0.5%. It is common for housing prices to fall in June, but a seasonally adjusted change of minus 0.5% indicates a weak trend, according to Henning Lauridsen, CEO of Eiendom Norge. From the turn of the year to May, house prices had risen every month and had risen to 7.7%, which meant that house prices in Norway were at their highest level ever. After the June figures, we ended up with an increase of 6.4% in the first half of 2023. The CEO of Eiendom Norge points out that this is a testament to a healthy and functioning housing market in Norway. Despite a weak development in house prices, the activity in the housing market remains high. The number of property transactions is high in all areas in Norway. In addition, both in June and so far this year, more homes have been sold than at the same time in 2022:
In June, 11,183 homes were sold in Norway, which is 2.8% more than the corresponding month last year.
So far this year, 50,774 homes have been sold in Norway, which is 2.2% more than in the same period last year.
The statistics also show an increase in the supply of houses throughout June.
In June, 12,819 homes were put up for sale in the country, a full 13.5% more than at the same time last year. As a result of this, there is now a better balance in the used housing market than what we have had earlier in 2023.
So far this year, 56,784 homes have been put up for sale in Norway, which is 5.2% more than in the same period in 2022. As usual, the number of unsold houses per day has risen throughout June. However, this number is lower than the corresponding month in 2019.
In June, it took an average of 30 days to sell a house, down from 35 days in May.
The shortest selling time was in Oslo with 19 days.
The longest sales time was in Tromsø with 57 days.
The strongest seasonally adjusted price development in June was in Hamar with Stange where the prices were unchanged.
The weakest seasonally adjusted price development was in Follo with a seasonally adjusted decrease of 2.3%.
The strongest development so far in 2023 has been in Kristiansand and Stavanger with surrounding areas with an increase of 11 and 10.3%.
The weakest development so far this year has been in Tromsø with an increase of 3.1%.
The CEO of Eiendom Norge estimates that the strong increase in interest rates will affect house prices in the future. In the second half of the year, much of the strong increase in house prices in the first half will be corrected, Lauridsen predicts. "The increased interest rates have a significant inertia in the economy, and with a further increase in interest rates now in June and more in the autumn, the housing price development will be weaker," he suggests.
Along the same lines, Chief Economist Sara Midtgaard of Handelsbanken and Senior Strategist Dane Cekov of Nordea Markets estimate that the fall in June is just the start of a downtrend in house prices. They predict that the recent interest rate hikes and expected increases in the autumn going forward will strongly impact the development of house prices, and house prices in Norway may continue to fall. However, Midtgaard and Chief Economist Kjersti Haugland of DNB Markets do not believe that the June figures will prevent the Bank of Norway from continuing to raise interest rates in the future.
Earlier in June, the Bank of Norway announced a double interest rate increase and raised the key policy rate to 3.75%, which is the highest since October 2008. The key policy rate is the Bank of Norway's most important tool for stabilizing price growth and developments in the Norwegian economy. Since August 2021, the interest rate has been raised 11 times from a historically low 0.00% to cool down the economy, so that the target of low and stable price growth can be reached. So far this year, the interest rate has been raised 4 times, from 2.75% to 3.75%.
The decision to double the interest rate hike is the Bank of Norway's measure to achieve the goal for monetary policy, which is that inflation should come down towards 2%. So far in 2023, we have seen a persistent increase in prices in the country, and consumer price growth is at 6.7% in May, which is clearly higher than the target. Norges Bank believes that the interest rate hike is necessary to prevent prices and wages from continuing to rise quickly. The future development of the policy rate will depend on economic development. As Norges Bank currently assesses the prospects and risk picture, the bank envisages that the rate will most likely increase to 4.25 during the autumn.
This rate increase will lead to increased borrowing costs. Norges Bank estimates that the mortgage rate will rise as the policy rate is further increased, and rise to about 5.4 percent during 2024. According to NRK's interest calculator, a mortgage of 2 million with an interest rate of 4.5 percent and 25 years repayment period will cost homeowners 1046 kroner extra per month, if the lending rate increases to the level that Norges Bank estimates. In addition, Norges Bank estimates that the share of interest expenses in income after tax, so-called interest burden, will increase from 9 percent this year to 10 percent next year, which is the highest interest burden since the early 1990s. In other words, the increase in the policy rate will mean that households have to spend more of their income on interest expenses in the future. Increased borrowing costs, along with rising prices in general, will mean that mortgage borrowers will have a tighter economy and reduced purchasing power.
Norges Bank's double increase will also have strong effects on the housing market. As experts point out, the interest rate hikes have begun to impact housing price development and will continue to do so in the future. Furthermore, the interest rate increase will have significant consequences for the housing supply in Norway. Marte Herje Strømme, analyst and housing expert at the Forecasting Center, suggests that the double increase may hit the housing market harder than ever. She explains that the sale and start-up of new homes are already historically low, and increases in the policy rate will result in even fewer new housing projects being possible to implement. The interest rate increase will thus influence the housing supply for a long time. This in turn contributes to price pressure in the market.
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Sources: Eiendom Norge, E24, Dagens Næringsliv, Norges Bank
