Economists and industry analysts warned a sharp downturn in the Norwegian construction industry is likely to have a serious affect on the wider economy. Experts said the new home construction sector has basically collapsed, and Norway is on the brink of a recession.
The Home builders Association (Boligprodusentenes forening) November figures show new home sales are down by 39 percent on the same time last year, reported Norwegian Broadcasting (NRK). The commencement of new home projects has dropped by 43 percent, and new apartment construction has plummeted by 61 percent.
“It seems we almost have had a collapse in the construction of ordinary housing for people,” Dag Aarnes, economics and taxation director at the Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon). “It’s probably a warning of something very serious underway in the housing market.”
“If we don’t get enough startup, I’m afraid we’ll also get a reduction in the total Norwegian economy,” said Per Jæger, director of the Home builders Association. Jæger said when residential construction halted in 2008, the rest of the community followed suit and a financial crisis ensued.
Construction is a major industry in Norway, with a flow-on effect to the wider economy in terms of employment and value adding. Figures from 2012 show construction added an additional growth in gross domestic product of .5 percent, reported NRK. About 210,000 Norwegians work in the sector; an amount that’s proportionately higher than countries including Spain and the USA. There, the real estate market crash was a major contributor to the economic crisis.
Banks had no doubt a construction downturn can shrink the economy. “We’re quite close to a recession now,” said the Chief Economist at bank-owed group Oak Alliance (Eika Alliansen), Jan Andreassen. “The loss of jobs in the construction industry can cause further deterioration of an already weak economy. Housing investment alone is NOK 140 billion (USD 22.7 billion). We can expect a fall of 20 percent, and that is NOK 30 billion, which again is more than one percent of GDP.”
As well as a fall in new home construction, new statistics showed housing prices at the end of 2013 were lower than the previous year end, for the first time in five years. House prices have dropped 5.3 percent since the peak last May. Some growth in August was the only thing that stopped a continuous price decline. Real estate agents predict the average price per square meter in 2014 will be 3.1 percent lower than last year.