Norwegian housing prices have risen higher than anywhere else in the world, according to new statistics from the Organization of Economic Cooperation and Development (OECD). They’re up nearly 25 percent in the past five years and have nearly doubled in the past decade.
The figures, reported on Thursday by newspaper Aftenposten, confirm what many would-be homebuyers in Norway already know: It’s mighty pricey in the Norwegian real estate market right now, especially in Oslo and Stavanger.
Aftenposten featured the example of a 44-square-meter (around 440-square-foot) flat in Oslo’s popular Grünerløkka district, once considered a fairly low-income area. Karoline Sandborg, age 31, bought the flat in an old building there for NOK 1.65 million in 2008. She sold it this week for NOK 2.33 million, an increase of 41 percent.
That’s not uncommon in the current real estate market, where showings have been packed even during the traditionally slow month of July. And even though the prime minister keeps warning of a potential economic downturn and Norwegian industry is hurting from the euro crisis, bidding is lively in the real estate market and prices keep rising.
Norway’s price rise of 24.6 percent from the second quarter of 2007 to the second quarter of 2012 topped the list of all OECD countries, followed by a comparable 21.8 percent rise in Australia and 21.1 percent in Switzerland. Next came Canada, Belgium, Sweden, Germany, South Korea and Finland, all with double-digit increases.
Housing prices in the euro zone as a whole were up just 1.1 percent over the five-year period. Eight countries included in the OECD listings experienced average price declines from 2007 to 2012, including the US and Japan. Ireland recorded the biggest price drop, of a whopping 49.1 percent.
Low rates and pent-up demand
Norway’s red-hot housing market is linked to low interest rates, low unemployment and strong pent-up demand fueled by a shortage of new housing under construction. Demand is highest for small apartments, with the annual influx of students who are descending on cities where universities are located sending prices and rents up even higher. Newspaper Dagens Næringsliv (DN) reported how one studio apartment (known as a hybel in Norwegian) sold for nearly NOK 100,000 per square meter recently to a student backed by parents who could guarantee the loan.
Economists are split on whether prices will continue to go up or whether the real estate market will ultimately crash. Most real estate brokers see no end in sight to the rising prices, based on demand.
“We’ve seen strong growth in incomes and it’s questionable whether interest rates will rise considerably over the next 10 years,” Roger Bjørnstad, chief economist at Pröyry, told Aftenposten. His firm hammers out price statistics for both the national real estate association Eff (Eiendomsmeglerforetakenes Forening) and online real estate market site Finn.no. “I expect that the prices will rise for many years ahead.”
Views and News from Norway/Nina Berglund
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