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Fast Comment NorwayModest housing price increase in March; close to Norges Bank's forecast

  1. Housing prices increased by 0.2 percent in March, close to Norges Bank's expectations
  2. Solid improvement in Oslo, but weaker trends elsewhere
  3. Some uncertainty remains, but we still believe the housing market has passed its trough
Housing prices increased by 0.2 percent in March, following 0.4 percent in February
After continuing to slide during the final quarter of 2017, housing prices have levelled out through the first quarter of this year. In seasonally-adjusted terms, the national housing price index was up by a modest 0.2 percent m-o-m in March (0.16 before rounding). This was following +0.37 percent in February and -0.32 percent in January. Taken together, national housing prices fell by 0.2 percent q-o-q in the first quarter of the year. However, this quarterly decline is a technicality, as it follows from a decline in December last year, resulting in a negative overhang in Q1 and then another negative reading in January. The three-month average through Q1 has been 0.07 percent, which we conclude is close to levelling out. The trough of the housing market was reached in January. The outcome for March was close enough to Norges Bank’s expectations. According to our calculations, Norges Bank had pencilled in a monthly rise of around 0-0.1 percent in March. Further ahead, Norges Bank is expecting housing prices to increase by 0.1-0.2 percent m-o-m (SA), which is a steady, albeit modest, increase. Today’s figures, taken together with the previously released figures for household debt growth (a bit lower than Norges Bank had anticipated), should not alter Norges Bank’s plans of lifting its policy rate in September.
Oslo is at the frontier of the improvement
Digging a bit into the details, Oslo is at the frontier of the improvement seen thus far this year. Here, housing prices have risen considerably throughout Q1, following its last recorded and severe drop (SA) back in December. This implies other regions performed poorly in March, as the overall price increase was no more than 0.16 percent m-o-m. For Norway excluding Oslo, the monthly balance between housing units approved for sale and actual sales has worsened over the past few months (i.e. more units have been put up for sale relative to actual sales). However, for Oslo, the situation has been nearly balanced and that was the case in March as well. Then again, we cannot ignore a key uncertainty, namely the scope for the supply side to increase further ahead, as the numbers of newly-completed units will rise from H2 2018 and further through 2019. Still, we maintain our base case that this will not cause a flood in the Oslo market, and we also believe demand will be solid enough to absorb the additional supply. However, it will have a dampening effect; as such, we do believe the monthly price increase in Oslo will moderate slightly. All told, trends thus far have been supportive of our case of a soft landing. For the housing market as a whole, we believe the trough was reached in January, and the overall outlook remains for modest price increases. Demand should be supported by solid employment growth and rising wage incomes. This also implies households in general will cope with the interest rate increase in September, as signalled by Norges Bank.


Marius Gonsholt Hov

Senior Economist


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