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In August, there was a minor uptick in Norwegian housing prices after two consecutive months of decline, as indicated by recent data from Eiendom Norge. Nonetheless, this August marks the lowest performance for the month in the 20-year history of housing price statistics. Experts attribute this trend to the effects of interest rate increases and anticipate a gradual decline in housing prices as the year progresses.
Based on the latest statistics, housing prices in Norway saw a 0.4 percent increase from July to August. However, when we account for seasonal variations, there was a slight decline of 0.6 percent in housing prices. By the end of August, the average cost for a home in Norway was 4.55 million NOK, up from 3.95 million NOK at the end of July. After the numbers for August, we have witnessed a 5.7 percent increase in housing prices since the beginning of the year. Nevertheless, housing prices are still 1.6 percent lower compared to the same month last year.
Bergen experienced the most robust seasonally adjusted growth in August, with housing prices increasing by 1.2 percent. In contrast, Drammen and its surrounding areas recorded a decline of 2.2 percent in housing prices, marking the weakest seasonally adjusted performance for August. Throughout 2023, Kristiansand and Stavanger and surroundings have shown the strongest growth, with increases of 10.4 percent and 9.7 percent, respectively. On the other hand, Tromsø has experienced the most modest price growth this year, with an increase of 2.7 percent.
As of August, there were 18,034 unsold homes in the Norwegian second-hand housing market, a record high since these statistics were first compiled in 2009. Simultaneously, the housing market displayed significant activity in the previous month:
· In August, a total of 9,270 homes were sold, representing a 2.6 percent decrease compared to the same month in 2022.
· So far this year, 64,178 homes have been sold, which is 1.4 percent more than in the same period last year.
· In August, 13,318 homes were listed for sale, 4.2 percent higher than the corresponding month in 2022.
· Year-to-date, 73,769 homes have been listed for sale, 5.4 percent higher compared to the same period last year.
Henning Lauridsen, the CEO of Eiendom Norge, noted that there is a significantly higher number of homes on the used housing market this year compared to 2022. Furthermore, both the number of homes listed and sold in 2023 is in line with figures from 2019. In August, the average time it took to sell a home in Norway was to 38 days, down from 47 days in July. Nevertheless, this was nine days more than the corresponding month last year. The shortest selling time was observed in Oslo and Stavanger, at just 24 days, while Tromsø had the longest selling time at 57 days.
August is normally a strong month for housing prices. The head of Eiendom Norge points out that the unusual weakness observed in August could be attributed to the impact of rising interest rates on housing prices. Similarly, analyst Marte Herje Strømme at The Forecast Center suggests that the decline in the housing market is a clear sign that the effects of interest rate hikes are beginning to affect households' finances.
Many experts predict that the trajectory of housing prices in the coming months will be somewhat weaker than usual.
- We are anticipating a milder trend in housing prices as we move into the autumn, and it is not unlikely that we may witness a pattern similar to last year. In the autumn of 2022, housing prices fell sharply towards Christmas before rebounding in January with the easing of lending regulations, states Lauridsen at Eiendom Norge.
This outlook is also shared by Strømme at The Forecast Center and Senior Economist Sara Midtgaard at Handelsbanken Capital Markets.
- This marks the beginning of a challenging autumn for the housing market, says Senior Economist Sara Midtgaard at Handelsbanken Capital Markets.
Midtgaard points out that the supply side of the used housing market remains robust, suggesting a potential decline in housing prices ahead. Chief Economist Kjetil Olsen at Nordea Markets also anticipates a subdued housing market in the autumn, with a projected 5 percent decline in housing prices. However, the economists anticipate that the expected drop in housing prices this autumn will likely be temporary. Midtgaard predicts a stable trend in housing prices throughout the next year, assuming a correction during this autumn.
- When we reach the beginning of 2024, the housing market will be at a level reflecting the new interest rate level, so by the time spring arrives, the bottom will have been reached. We should then envision an increase in seasonally adjusted prices, she adds.
Strømme at The Forecast Center echoes a similar sentiment, suggesting that the low rate of housing construction will eventually lead to a weaker supply side and potentially result in stronger growth in housing prices. She anticipates weaker prices this autumn but expects the shift in housing price trends to occur towards the end of the following year and into 2025. According to The Forecast Center's latest estimate for new housing construction, it is unlikely to meet the growing housing demand in the coming years. A constrained supply side may lead to increased demand in the existing housing market, says Strømme.
CEO Lauridsen of Eiendom Norge also expresses concerns about the housing market in the coming months:
- A subdued performance in used housing prices could worsen the conditions in the new housing market, where we are currently witnessing the weakest performance since the banking crisis of 1988-1992.
Lauridsen emphasizes the need for stability in the central bank's policy rates, the removal of lending regulations, and an increase in housing construction to lower housing prices and further develop the Norwegian homeownership path.
Oslo has been one of the regions experiencing robust price growth so far this year. However, recent price statistics reveal a 1 percent decline in housing prices in Oslo for the past month. After adjusting for seasonal fluctuations, housing prices in the capital city decreased by 1.4 percent. This marks the first August since 2019 to witness a decline in housing prices in Oslo. To put it in perspective, housing prices in Oslo increased by 0.8 percent in August last year, 1.6 percent in 2020, and 1.2 percent in 2019.
Since the beginning of this year, housing prices in Oslo have increased by 5.8 percent. Nonetheless, Oslo's housing prices this August were 1.3 percent lower than in the same month last year. As of the end of August, the average cost of a home in Oslo stood at 6.35 million.
Fortunately, it's not all negative news in the current housing market. Jørgen Hellestveit, the leader of FINN Eiendom, reports that there are currently 18,600 homes available for sale on the FINN marketplace. While this number is lower than pre-pandemic levels, it represents a 25 percent increase compared to the same day in 2022.
- Based on our data, it appears that the housing market is gradually normalizing, and we are moving towards a more balanced housing market scenario in Oslo, says Hellestveit.
Sources: Eiendom Norge, DN (1), DN (2), E24, NRK
