Norway’s economic downturn may already have bottomed out, except in the Stavanger area, according to fresh prognoses released on Wednesday. Regional differences are expected to become greater and in Oslo, housing prices may rise another 24 percent by the end of 2018.
“We are relatively optimistic about the Norwegian economy and don’t think the downturn will get much worse,” Roger Bjørnstad, chief economist at economic research firm Samfunnsøkonomiske analyse, told newspaper Dagens Næringsliv (DN).
Bjørnstad and his colleagues were presenting new figures at a real estate conference in Oslo on Wednesday that show increases in housing prices nationally and in five of the country’s six largest cities through 2018. Only Stavanger, capital of Norway’s oil and offshore industries that have been hit by falling oil prices, showed a decline over the next three years and it was relatively moderate at 1.4 percent.
All the other cities showed double-digit increases by the end of 2018, with Oslo prices expected to be up by 24.4. percent, Bergen by 22.1 percent, Tromsø by 19.5 percent, Kristiansand by 16.2 percent and Trondheim by 15.1 percent. On a national basis, housing prices are expected to rise 7.4 percent this year, 4.5 percent next year, 2.7 percent in 2017 and 0.6 percent in 2018, for an overall hike of 16 percent.
Regional differences were stronger than usual, however. While housing prices are expected to rise 19.3 percent in Buskerud County, growth in neighbouring Telemark was set at just 8.7 percent, and 7.6 percent in Aust-Agder, a southern county that also has several oil, offshore and shipping firms. Rogaland, the county where Stavanger is located, logged the lowest growth prediction of 0.8 percent, compared to 19.6 percent in neighbouring Hordaland (where Bergen is located) farther up the coast in Sogn og Fjordane.
Lower growth year-by-year
Price growth was due to taper off year by year, though, as homebuilding boosts supply and population growth subsides because of a slowdown in job migration. Bjørnstad also noted that housing prices are already high in Norway, and that rising unemployment may also dampen demand.
He said low interest rates will keep the market strong, however. “All the above factors won’t halt housing price development,” he told DN. “It just shows how strong the effect of interest rates is.”
The Stavanger area will continue to be affected by the oil industry slowdown, Bjørnstad said, which he described as “stronger than we had expected.” He and his colleagues clearly have faith in Norway’s overall economic strength, however, and think, as do several others, that economic growth will resume next year. He also thinks the unemployment rate, which has risen in line with oil industry job cuts and their ripple effects into other sectors, will flatten out at the current 4.5 percent.
The new analysis also predicts ongoing weakness of the Norwegian currency, the krone, which in turn is boosting export industries like Norwegian seafood and metals. Prices have been rising lately, largely because the weaker krone makes imports more expensive, but consumer demand remains relatively strong, also because of low interest rates.