Prices for a barrel of Norway’s North Sea oil rose well over USD 40 a barrel on Friday, just a day after real estate brokers reported the biggest jump ever in housing prices for the month of May. Now Norwegian economists are predicting an even quicker recovery from the Corona crisis than expected.
State statistics bureau SSB (Statistics Norway) published its latest prognosis for the Norwegian and international economy Friday morning. Even though the economy remains in “deep crisis” after two months of state shutdown to contain the Corona virus, SSB researcher Thomas von Brasch states that “the outlook has improved” during the past few weeks.
That’s in line with the outlooks of chief economists at other Norwegian banks and financial institutions, as reported earlier this week. Von Brasch and his colleagues now believe Norway’s gross national product will fall by 3.9 percent this year, instead of the 5.5 percent predicted in April.
Even the earlier 5.5 percent decline was better than the outlooks for many other countries suffering from the effects of Corona containment. And SSB’s new and improved outlook for the Norwegian economy was published before the price of Norway’s most important export product, oil, jumped again Friday on news that the OPEC+ members had agreed to extend oil production cuts by a month. That will reduce supply, and oil prices rose over USD 42 at one point Friday afternoon, up from the high USD 30s earlier in the week. It’s also the highest oil price recorded since early March, even before the government cracked down on the spread of Corona infection by asking Norwegians to stay home.
Krone stronger, too
Friday’s oil price rise also strengthened the value of Norway’s currency, the krone, once again. On Friday afternoon it cost NOK 9.30 to buy one US dollar, down from as much as NOK 11 earlier this spring. The Oslo Stock Exchange, moreover, was also having a good day on Friday, with its main index up 1.95 percent at 4pm.
On Thursday, meanwhile, came more good news from the residential real estate market, at least for investors and homeowners. Housing prices rose 1.9 percent from April to May and are now 2.5 percent higher than they were a year ago. It was the strongest price rise in the history of the state real estate organization Eiendom Norge‘s statistics, and means that the decline tied to the Corona crisis earlier this spring has been more than offset.
“Housing prices rose strongly in all areas of Norway in May,” said Henning Lauridsen, chief executive of Eiendom Norge. He pegged the price surge to how Norway is “opening up again” after the Corona crackdown, with fewer people unemployed (17,118, according to SSB) at a time when interest rates are lower than ever.
Oslo prices rose the most
Oslo’s housing prices rose the most, 2.2 percent from April to May, while Oslo and Ålesund shared the top spot for year-on-year increases at 3.9 percent. That was in contrast to Stavanger, which saw a price decline of 1.3 percent from May of last year, likely because it’s home to Norway’s oil industry, which remains worried about its future despite Friday’s jump in oil prices. Top politicians in the Norwegian Parliament, meanwhile, continued on Friday to debate proposals for tax relief for the oil industry. A Thursday deadline on the oil tax issue had to be extended, and party leaders took over the task of hashing out a compromise.
Some of the overall housing price rise nationwide could also be linked to fewer homes on the market. A total of 9,615 homes were sold in May, 7.7 percent less than in the same month in 2019. There was also an 18.4 percent decline in the number of homes put on the market for sale. Many homeowners are believed to be waiting to sell until the market stabilizes.
They may take the plunge now, given all the suddenly positive economic indicators. SSB’s economists remain cautious, meanwhile: “Even though it looks like the upturn is coming sooner than expected, the situation remains serious for the Norwegian economy,” von Brasch stated. “Lower international demand for oil and (relatively) low oil prices will have an effect on economic development for several years ahead, even if Corona infection rates here at home remain low.”