As Norway’s residential real estate market continues to boom despite the country’s recent economic slowdown, nowhere is price growth higher than in the capital of Oslo. Demand is so high that average prices in September were up 20 percent in three east-side neighbourhoods. Economists don’t think the government went far enough in addressing the price spikes in the new state budget.
Gamle Oslo, Grünerløkka and Østensjø all registered gains of 20, 20.4 and 20.2 percent respectively in September, compared to September of last year. Prices were up 18.5 percent for Oslo as a whole.
“The trend in Oslo now is that prices between the east and west sides are evening out somewhat,” Erik Lundesgaard, spokesman for the real estate brokers’ association Eiendom Norge, told news bureau NTB. Oslo’s east side has traditionally had lower housing prices than the more affluent west side, but prices per square meter in the “inner east” areas like popular Grünerløkka are approaching those of the inner west areas like Frogner.
Brokers claim the price hikes are fueled mostly by high demand and low supply, with few housing units on the market so far this year. Several economists are complaining that the new state budget released on Thursday did not fully address what they warn is a real estate bubble ready to burst. They wanted to see fewer tax advantage to real estate investing, and more measures to spur homebuilding.
While supply and demand are important factors, there also are stories like the one in newspaper Aftenposten on Thursday, which revealed how the father of a prospective homebuyer bought a flat sight unseen last weekend and paid more than NOK 1.35 million (USD 168,750) over appraisal so that his son would have a place to live. The flat, in Oslo’s St Hanshaugen neighbourhood, had been listed for NOK 4.85 million, and went for NOK 6.2 million.
“He (the buyer) had seen photos of the flat and read the prospectus,” seller Christian Fredrik Wesenberg told Aftenposten. Wesenberg bought the 64-square-meter (640-square-foot) flat for NOK 2.85 million in 2007 and remodeled its bathroom and kitchen, but still roughly doubled his money in nine years.
“The offer came in while I was on my way to watch Cecilia Brækhus box on Saturday,” Wesenberg said with a laugh. “I told him that ‘if she wins, I’ll sell,’ and then she won almost before we walked in the door.” The buyer, who reportedly bought the flat as a birthday present for his 25-year-old son, declined comment.
Parents with lots of home equity themselves have been accused of driving up prices by striking such deals on behalf of their children. Christian Vammervold Dreyer of Eiendom Norge called the price “high now, but maybe not over the long run.”
Real estate prices have been rising all over Norway, also lately in areas hard hit by the dive in oil prices two years ago. Dreyer said there were 40.1 percent fewer properties on the market last month in Stavanger, “a clear sign that the market is improving there, too.” On a nationwide basis, the increase in average prices paid in September was up 10 percent over the same month last year.