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Fast Comment NorwayPreview: Housing prices in April (due next Friday)

  1. Housing prices probably hit a trough in January...
  2. prices have risen modestly (S.A) throughout February and March
  3. A soft landing indeed; modest outlook
Housing prices probably hit a trough in January; a soft landing and a modest outlook
To recap, housing prices fell by 0.32 percent m-o-m (S.A) in January, before rising modestly by 0.37 percent in February and then 0.16 percent in March. In other words, the national housing price index has more or less levelled out during the first quarter of the year. The annual change was -2.2 percent in March, emphasising how the correction in the overall housing market over the last year has been modest (definitely what we would deem a “soft landing”). Oslo, which was among the regions experiencing the most notable downward correction in 2017, has been at the forefront of the improvement so far this year. However, a couple of caveats should be mentioned. For starters, the monthly balance between supply (housing units approved for sale) and “demand” (actual sales/transfers) has improved notably. But the breakdown is less favourable. As shown in the charts below, the average number of housing units approved for sale (during January-March) has fallen below the comparable levels seen during the years after the financial crisis. Sales/transfers, on the other hand, have been more in line with the historical norm. The key interpretation is that the housing price increases seen in Oslo over the past few months have been given a helping hand by a more limited supply. This brings us on to our next point, namely that supply (in the secondary market) is expected to increase ahead as completion of newly constructed units is expected to rise later this year and further into 2019. And with a lower net inflow of people (from abroad or from other regions), there is reason to believe that many of those who will move into new apartments will have to supply their existing homes in the secondary market. With regard to population growth, note that this has come down sharply over the past years, driven by lower net immigration. Even if we extend the population data for Oslo with Akershus, the net inflow of people from other regions has declined over the past two years. But the key message is that the total net inflow has been reduced for several years, and mainly due to lower net immigration. While we continue to expect the new supply will not “flood” the market, as explained in our newly released Macro Forecast Norway, the balance between supply and demand may not continue to be that favourable ahead; in isolation, this will have a dampening effect on housing prices. In addition, interest rates are expected to rise from September, which is an even more important dampening factor. All told, housing prices may have passed their trough, especially in Oslo, but we do not foresee a sustained and sharp upward spiral going forward. The outlook is for modest price increases throughout 2018-19, with nominal housing prices probably rising a little less than household incomes.


Marius Gonsholt Hov

Senior Economist


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