Norway’s central bank is once again keeping its key interest rate unchanged at a relatively high 4.5 percent, just days after real estate brokers nationwide reported the weakest April housing sales since 2017. Some analysts predict the latest period of rapidly rising housing prices is coming to an end.
“I think the extraordinary housing price growth is behind us right now,” Sara Midtgaard, senior strategist at Nordeal Markets, told newspaper Dagens Næringsliv (DN) on Wednesday. She was responding to the latest sales figures released this week from the national real estate brokers’ association Eiendom Norge. They showed just a 0.2 percent nominal price rise from March to April, and an actual decline when adjusted for seasonal variations.
It amounted to a much weaker April than expected after what had been a strong start to the year. Housing prices had jumped an average 6.1 percent nationwide after the first two months before leveling off in March. They’re still 5.9 percent higher than in April of last year, but now analysts are seeing the effect of the highest home mortgage rates in years. Turbulent markets and economic uncertainty created by new US President Donald Trump are also having an effect, according to analysts and the central bank itself.
Losing faith in a rate decline
Midtgaard and others noted that the April slump could have been influenced by other factors, not least the late Easter holiday period when real estate transactions often subside. “But it looks like more households aren’t expecting any interest rate cut this year,” she said, and that always affects the housing market. Oddmund Berg at rival DNB Markets thinks housing prices have risen so much in Norway that many now expect more moderate price growth ahead.
It’s also taking longer to sell homes, according to Eiendom Norge, fully 47 days on average in April. The average price per square meter was NOK 54,551 nationwide, but with wide regional variations. Prices of NOK 100,000 per square meter and higher have become common in Oslo and several other Norwegian cities. Oslo, however, registered the weakest price growth in April while Stavanger was the highest, with fully 11.1 percent so far this year but also tapering off last month.
Rate decline still the goal
Pål Longva, deputy governor of Norges Bank, still expects rates will decline later this year but also pointed to the economic uncertainty tied to Trump’s tariff regime. “Trade barriers have become more extensive and there is uncertainty about future trade policies,” stated Longva when stepping in on Thursday for central bank governor Ida Wolden Bache. She needed to take part in hearings at Parliament Thursday morning, but was as always involved in the interest rate decision taken Wednesday by the central bank’s committee on monetary policy.
It was the latest postponement of the interest rate declines Bache had predicted for this year, taken also while Norway’s currency, the krone, remains weak. Lowering interest rates wouldn’t help strengthen it, and some claim a weak krone boosts the Norwegian economy because it generates more kroner on exports, not least of Norway’s oil.
The current policy rate has remained at 4.5 percent since December 2023, even as rates have declined in many other countries, but Bache remains committed to bringing inflation down to the bank’s target of just 2 percent.
NewsinEnglish.no/Nina Berglund
