Costs and prices for new housing units have risen so high in Oslo that sales of new units on the drawing board have plummeted and some developers aren’t breaking ground on new projects. Demand for housing remains high, though, both in Oslo and many other cities in Norway, with sales of existing homes and flats reportedly picking up after the summer and some price-cutting.
Local newspapers have been packed with real estate ads during the past week, as brokers prepared for what they consider two of the busiest real estate sales weekends of the year. With Norwegians back from summer holidays, many are keen to attend open house showings and traffic was said to be good this past weekend. Not all the indicators coming out of the housing market, however, are good.
“Oy-yoy-yoy, these are ugly numbers,” exclaimed Per Jæger, managing director of the homeowners’ association Boligprodusentenes forening, to newspaper Dagens Næringsliv (DN) when examining fresh statistics for housing starts and sales of new units. A thousand of his members have sent in their figures from around the country for how many units they’ve sold and how many new housing projects have gone into construction.
All told, sales were up 1.5 percent during the first seven months of the year, but county-by-county variations are wide. Oslo’s numbers were the worst, with its share of total new home sales nationwide down 40 percent, from 13.3 percent to 8 percent at the end of July. Oslo’s share of housing starts fell from 10.3 percent last summer to 7 percent now.
Affordability is the challenge, not demand. Given population growth alone, Jæger told DN that Oslo needs construction of around 7,000 new housing units a year. “If this trend continues, we’ll see a maximum of 3,000 to 4,000 new units, and then the rate of construction would need to be considerably higher than today,” he said.
One problem is that developers have paid too much for land on which they planned to build. That pushes up the price of each individual unit, to a level that’s exceeding affordability. “It’s just become too expensive, and prices have topped,” Kjell Senneset, an economist at consulting firm Prognosesenteret told DN. Developers who paid high prices for their lots “can’t rationalize the costs,” Senneset said. “The prices get too high. The banks are also putting the brakes on homebuyers.” New state regulations call for higher down payments, and the banks also face new capital requirements.
New price reductions
Senneset doesn’t foresee a crack in the real estate market like some economists have warned about, because too few new housing units are being built and demand is high, but he does see prices flattening out after years of big increases.
Several flats in Oslo that didn’t sell before the summer holidays are now being advertised at lower prices, with some high-end properties asking as much as a million kroner less now than in June. One example was a flat in Oslo’s fashionable Gimle district that’s now being advertised for NOK 9.9 million (USD 1.6 million), down from an initial asking price of NOK 10.9 million. “I didn’t think the price was so high, but the market did,” broker Espen Hordnes told DN. Finn.no, the Norwegian equivalent of a multiple listing service, is now flagging some of its properties that are being re-advertised at lower prices.
Other brokers say it seems easier to sell now than it was in June. “We saw surprisingly good attendance” at real estate showings (called visninger in Norwegian) over the weekend,” senior broker Børre Gåsvær of Nordvik Partners told DN. Single-family homes and large row houses attracted the most interest, while there was less interest in small flats.
Cooling down brokers’ bidding rounds
Consumer advocates, meanwhile, want buyers to be able to spend more time evaluating properties and not be so pressured into submitting bids or making decisions. With most property showings only lasting an hour or two and brokers busy, many buyers find themselves using less time on a home purchase in Norway than they might on a paid or shoes. One of four home purchases ends up in conflict, notes Thomas Bartholdsen of the Consumer Council (Forbrukerrådet).
“When you for example buy a new stereo system, you plan it, shop around, consult friends, surf the net,” Bartholdsen told newspaper Dagsavisen recently. “When you’re buying a home, everything is different. From the time of a showing and when the bidding closes, maybe only a day has gone by.”
He and the council want the state to impose at least a 48-hour allowance for bids, while the Finance Ministry has decided that all bidding must take place in writing from January 1st. That may ease the rapid price escalation that occurs in heated bidding rounds, and head off conflicts, they feel.