Real estate brokers in Norway say they’re seeing clear signs that the country’s overheated housing market of the past few years is finally starting to cool down. Buyers are more cautious and price growth, especially in Oslo, flattened out in March.
Norway’s national real estate organization Eiendom Norge released new housing price statistics on Wednesday that showed just a a 0.3 percent rise on a monthly basis. Prices were, on average, still 11.7 percent higher than a year ago “but that’s on the downside of what we usually have in March,” said the organization’s chief executive, Christian Vammervold Dreyer. “The trend now is more moderate growth than we have become used to. We expect annual growth rates to go under 10 percent this summer, and down towards 6-8 percent by the end of the year.”
That’s still solid appreciation and arguably healthier than the double-digit price rises that contributed to huge growth in household debt in Norway and raised fears of a housing bubble that was about to burst. Demand for housing is also now being met through a wave of new homebuilding projects that has even prompted some economists to worry that there’s suddenly too much construction going on all at once, instead of too little, not least in Oslo.
‘Much calmer’ market
Others believe pent-up demand and low interest rates will absorb the new housing but newspaper Dagens Næringsliv (DN) reported earlier this week that the wild real estate market in Oslo is sobering up. “Objects in Oslo that would have have been snapped up in the first showing last year now need, in some cases, another round of showings,” Terje Halvorsen of DNB Eiendom told DN. “Something is happening (in the market),” he added. “The price level in Oslo (which jumped 24 percent during the past year) has become so high that folks are becoming more careful. Potential buyers are now very price-conscious.”
Halvorsen had expected that the monthly statistics for March would be modest and so did Leif Laugen of real estate brokerage firm Krogsveen in Oslo. “It’s not the same market as last year, it’s much calmer,” Laugen told DN. “There’s a better balance between supply and demand.”
The banks are also reporting fewer loan applications, which also was expected after the government tightened regulations in the residential lending market as of January 1. Buyers must now have more capital and loan amounts are capped at five times income. Investors also must have 40 percent capital behind purchases of secondary homes. Trond Mellingsæter, head of Norwegian operations for Danske Bank, told DN already last month that “we’re saying ‘no’ to more loan applications.”
Newspaper Aftenposten reported in early March that two-thirds of homes sold in Oslo in February still changed hands at prices that were higher than what sellers were asking. The market was still described as “red hot” in January, but last week, the large housing cooperative OBOS reported that average prices on its units fell 1.2 percent in March. That was one of the first signs that the market is stabilizing. It’s also taking longer to sell residential property, with the national average now at 34 days, compared to 27 days in March last year.
Even when the market was at its hottest in Oslo late last year, statistics showed that Norwegians still used less than 20 percent of their disposable income on housing costs. That’s much less than in many other countries including neighbouring Sweden and Denmark, Germany and the Netherlands.
“Prices have risen enormously, but it’s interesting that Norwegians nonetheless spend a low portion of their income on housing,” Mari O Mamre, an economist at the analysis firm Ny Analyse, told DN. It amounts on average to 17.6 percent, compared to 24.5 percent in Denmark, according to a report from Oxford Research.
“We have a population with good welfare and purchasing power compared to the other countries,” Mamre said. Rental rates are also high in Norway, especially Oslo, so it still pays to buy a home instead of renting one. Only 23 percent of homes in Norway are rental units, compared to 52 percent in Germany, acording to the report. It also showed that of Norway’s 2.3 million households, 1,457,979 are owner-occupied, 329,120 are owned through housing co-ops and 521,290 are rental units.
And despite the high prices in recent years, more young Norwegians own their homes, thanks to low interest rates and financial assistance from parents and grandparents. State statistics bureau SSB (Statistics Norway) reported earlier this year that the portion of Norwegians aged 25-30 who own their homes rose 25 percent from 2004 to 2016. In 2004, 34 percent of Norwegians in that age bracket owned their homes. Last year, that had risen to 42 percent.