Average prices of both new and used homes fell in Norway last month, another sign that the country’s once-red-hot residential real estate market has cooled off. While many cite a better balance between supply and demand, it’s not good news for builders of all the housing projects now underway.
“It seems like there’s been a shift,” housing analyst Mari Mamre of the Oslo firm Ny Anaylse told newspaper Dagens Næringsliv (DN) even before September began. She noted how prices for new, unsold housing units were being reduced.
“In order to boost sales, the developers lower prices,” Mamre added. There’s been a “correction” in the market for used homes, she said, “now it can be that new housing prices are following after.”
The share of new “re-priced” housing units under construction or even finished and unsold rose from around 4 percent during the period from February to April, to a bit under 8 percent from June through August. A total of 6.4 percent of all new housing units on the market in Oslo were reduced in price through the summer, and the number has risen to around 10 percent since.
Newspaper VG reported that actual sales of new leiligheter (condominiums) fell 22 percent in August compared to August of last year. Single-family housing sales are down 11 percent.
Price reductions have amounted to around a half-million kroner per unit. Mamre thinks that can be healthy, for everyone but profit-minded developers: “After the galloping prices from 2015 until the first quarter of 2017, it’s sensible that prices are adjusted down now in some cases. That will especially help first-time buyers.”
She noted that developers nonetheless hesitate to cut prices, because it can raise expectations on further price cuts and prompt prospective buyers to “sit on the fence,” waiting to commit to a purchase in the hopes of another price cut.
“But when inventory isn’t bought, it’s expensive to sit on unsold homes,” Mamre told DN. “Prices will also land at the level that reflects the balance between supply and demand in the end.”
‘Weak negative trend’
Prices for new housing in general have been generally stable, with only a weak negative trend during the past six months. In the rapidly developing Oslo waterfront area of Bjørvika, where building activity is extremely high, prices haven’t fallen, at least not yet. Mamre said that in some cases, developers have even tried to raise prices.
The “weak negative trend” extended last month to the residential resale market. Numbers released last week showed an average price decline of 1.1 percent from August to September 2018. Prices were still 2.4 percent higher than September 2017 on a national level, but that’s way down from the double-digit increases common a few years ago.
The Fredrikstad-Sarpsborg area in Southern Norway had the highest price rise, up 4.8 percent over last year, while the lowest price growth was in Stavanger, up just 0.3 percent. The statistics were compiled by the national real estate brokers’ association Eiendom Norge in cooperation with sales portal Finn.no and the real estate firm Eiendomsverdi.