Even though unemployment is rising and Norway’s economic boom is fizzling, housing prices hit their highest level ever in August. They rose another 2.5 percent just from July on a nationwide basis, but researchers continue to caution that the market is about to turn.
There were no signs of that in the latest statistics presented this week by the residential real industry’s national trade association (Eiendom Norge). “There was a strong increase in housing prices last month,” said the association’s managing director Christian V Dreyer. August 2015, he said, registered the highest prices ever paid in Norway: “It’s an all-time high.”
He told news bureau NTB that he wasn’t surprised, though, despite otherwise turbulent financial markets and growing economic uncertainty in Norway. He said the jump in August was “a natural consequence” of a relatively weak July.
Demand also continues to outpace supply, and prices are especially high in and around the center of Oslo. The area registered a formidable 12.2 percent increase over average prices paid in August of last year, and prices are running at as much as NOK 100,000 per square meter, 10 times the level of the early 1990s when a real estate market considered strong at that time suddenly collapsed.
Several economists have been warning of a housing bubble that will burst as well. Torbjørn Eika, a researcher at state statistics bureau SSB (Statistics Norway), thinks prices will fall because of rising pressimism within Norwegian households as the economy slows down. The sudden dive in oil prices continues to result in layoffs within Norway’s important oil and and oil supply industry, with the ripple effects leading to cutbacks in other sectors as well. That’s leading to growing uncertainty as more people fear they’ll lose their jobs.
Eika also noted that income growth is low, so he thinks housing prices will fall during the rest of this year and into 2016. SSB researchers believe “negative expectations” will lead not only to a halt in housing price growth “but that prices can also come down,” even if interest rates remain at their current record low levels or decline.
Meanwhile, real estate brokers continue to enjoy brisk business with the exception of the Stavanger area, where prices in the oil capital’s county of Rogaland fell. News bureau NTB reported that hard-hit Stavanger and Sande were the only areas where prices declined, by 1.2 percent and 0.3 percent respectively. It’s also taking much longer to sell homes in the Stavanger region, from 38 days in August of last year to 57 days last month.
In Oslo, however, bidding wars still regularly send prices above market appraisals that already are viewed as high. Dreyer of the brokers’ association linked the ongoing increase to Oslo’s population growth and a lack of new housing coming on line. Prices also jumped, though, in cities like Larvik (up 3.3 percent over July despite some local layoffs) and Tromsø (up 2.4 percent). On a nationwide basis, average prices were up 7.7 percent over August of last year.