Real estate pros predict price hike

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There’s widespread agreement among analysts, real estate brokers and economists that Norway’s already-high housing prices will jump again, on the back of record-low interest rates. Amidst all the debate over economic “crisis” in Norway, prices in the Oslo area are expected to rise 20 to 30 percent over the next three years, because of strong demand and low financing costs.

Construction continues on many new housing projects in Oslo, where demand is high and the economy still relatively strong. PHOTO: newsinenglish.no

Construction continues on many new housing projects in Oslo, where demand is high and the economy still relatively strong. PHOTO: newsinenglish.no

Only in the Stavanger area, where major cutbacks in the oil and offshore industry have hit the job market hard and fueled much economic uncertainty, are real estate prices expected to fall. They already have, with predictions of another 5 percent decline this year. Other areas of Western and Southern Norway where many residents have been working in the oil business are struggling as well.

Newspaper Dagens Næringsliv (DN) reported that on a national basis, though, housing prices are still expected to rise 15 percent by 2019, according to prognoses from research firm Samfunnsøkonomiske analyse AS. Its leader and chief economist Robert Bjørnstad also pointed out that even in Stavanger, real estate prices will likely start rising again in 2018, when the oil industry itself is expected to turn around.

The Norwegian central bank’s announcement on Thursday that it was cutting its key policy rates by another quarter-point, to just 0.5 percent, will only fuel the housing market, experts say. “It will get more people to buy homes and can lead to price hikes of between 20 and 30 percent,” Anders Langtind, partner in the Privatmegleren real estate agency and board leader of the Oslo and Akershus real estate brokers’ association, told newspaper Dagsavisen.

Langtind cautioned, though, that the central bank’s move won’t have a major effect on the mortgage rates at Norwegian banks. Most of the majors, like DNB and Nordea, didn’t react immediately to the central bank’s announcement, and Langtind said they can’t offer rates much below 1.6-1.7 percent because they still need to make some money on their loan portfolio. Some banks are already offering adjustable rate mortgages at 1.99 percent, so Langtind doesn’t see much of a rush of even lower offers to attract more loan customers.

Professor Jan Tore Klovland at the Norwegian business school NHH (Norges Handelshøyskole) in Bergen agreed, stressing that there’s “no mechanical connection here” between the central bank’s latest rate reduction and and lower mortgage rate offers for customers. The rate cut by Norges Bank was nonetheless interesting, he said: “This is the lowest (key policy) rate in history. Even in periods of falling prices, interest rates have never been lower than this.”

‘Large geographic differences’
The sheer prospect of low rates for the foreseeable future can further stimulate the housing market, despite the current threats of job losses and rising unemployment. “We’re expecting housing prices to rise 3-4 percent this year and around the same next year,” Kjetil Olsen, chief economist at Norway’s second-biggest bank Nordea, told DN. He presented prognoses for the Norwegian economy this week that the oil industry downturn would continue but that it would not spread further to other parts of the country. He sees “large geographic differences” among regional economies, with some areas of Norway doing well while the West Coast suffers. The biggest difference, he said, will be seen between Stavanger and Oslo.

The predictions come despite figures presented earlier this month showing the weakest houseing sales in February since 2003 on a nationwide basis, with an overall price decline of 0.2 percent. That was heavily influenced, though, by the price declines in Stavanger and Sandnes and increases in Oslo and Bærum.

There also have been signs that fewer parents and grandparents will be helping their offspring buy homes by providing capital, loan guarantees or both. Many have tapped their own equity in recent years to spare their grown children from renting, and that’s also been cited as a reason prices have soared so high, especially in Oslo. Armed with money or other financial assistance from their family, young prospective homebuyers have been able to take part in bidding wars over properties, sending prices way over appraisal and to levels they otherwise wouldn’t have been able to afford on their own. DN reported recently that economic uncertainty and fears of losing their own jobs are now making parents less willing or able to help their children into the housing market.

“Parents have been part of the speculation in the housing market,” economist Bjørnstad told DN. Now they may see that the risk is too high, he suggested, despite all the price-rise prognoses.

newsinenglish.no/Nina Berglund