Now even real estate agents are sounding the alarms over Norway’s rapidly rising prices for single-family homes and apartments. Figures released on Monday show they’ve risen 9.1 percent on average nationwide, and a stunning 16.3 percent in Oslo.
In some neighbourhoods of Oslo, sale prices were up 18 percent in August compared to the same month last year. “This is the strongest growth we’ve seen in August in the last 10 years,” Christian Vammervold Dreyer of the real estate brokers’ association Eiendom Norge told state broadcaster NRK.
At the same time, the total number of sales in August took a dive, simply because so few homes are on the market. Demand has far outpaced supply, which is what brokers claim is causing the market to “boil over” for buyers.
They may get burned. Kari Due-Andresen of Handelsbanken Capital Markets worries there are now clear signs of a real estate bubble that may pop. When prices have risen so high and rapidly, there’s often a so-called market “correction” and Due-Andresen won’t rule that out. “I would say there is a great danger that we can get a correction in the aftermath of this,” she told newspaper Dagens Næringsliv (DN).
Some brokers think prices in Oslo will have risen as much as 25 percent by the end of the year. “We see that more and more people are desperate to find a home,” Grethe Wittenberg Meier of real estate brokerage Privatmegleren. Both Meier, Dreyer and several other brokers link the price boom to a housing shortage, especially in Oslo. They blame local politicians who haven’t made it easy enough for developers to build more housing.
Some buying sight unseen
“There are so few homes listed right now that folks have been willing to buy properties sight unseen, just to get a place to live,” Meier told NRK. While prices skyrocketed in August, brokers note that the actual number of homes on the market took a dive. They say it’s “unhealthy” that there is so little product and such high demand.
Due-Andresen isn’t so sure. She noted that real estate prices sagged earlier this year and that while rental rates have risen, they haven’t been gone nearly as high as home prices. “If there’s such a huge need for places to live, the rental market should have risen more than it has,” she said.
She thinks more optimism in the Norwegian economy is mostly behind the boom. As reported earlier, many young buyers are also backed by parents whose own homes have jumped in value and they’re tapping their equity to help their children buy their first home. They’ve been among the ones most willing to bid up prices.
Sales prices well over appraisal
Odd Nymark, managing director of the EiendomsMegler1 brokerage in Oslo said the sales his firm handled in August mostly went for prices that were 11 percent higher than appraised value. Several banks have refused to lend money to first-time buyers who want to borrow more than their incomes allow, but sales often go through if the eager buyers find financing elsewhere, not least through their parents.
Even the relatively conservative OBOS real estate cooperative reported that average prices for their units have surpassed NOK 60,000 per square meter for the first time. Prices in many areas of Oslo are running NOK 80,000-100,000 per square meter, or even more.
Prices were also climbing in other cities all over Norway, up 12.9 percent in Hamar, 13.1 percent in Bærum and 12.4 percent in Asker. Prices have jumped in Trondheim (up 37.3 percent in the last five years) and only in Stavanger have they slumped. In August, though, even the hard-hit oil capital reported a price rise of 1.3 percent from July.
Brokers were calling on local politicians to support more homebuilding while some economists were urging changes in the tax system instead, since it heavily favours home ownership in Norway. They think buyers should no longer be able to write off all their interest payments on debt, and that homes should be taxed more heavily in general. That’s not popular in Norway, however, and few if any politicians seem willing to put such proposals forward.