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Fast Comment NorwayHouse prices well above Norges Bank's short-term estimates

  1. House prices rose by 1.1 percent in May (S.A)
  2. Well above central bank's short-term estimates
  3. Norges Bank will see this as further reason to raise the policy rate in September, in our view
House prices rose by 1.1 percent in May (S.A) versus 1.0 percent in April
According to Eiendom Norge, house prices rose by 1.1 percent in May, following the 1.0 percent increase in April. As shown below, the trend has turned clearly positive over the past four months. The outcome for May was not totally surprising, given the strong signals from media reports and accelerating OBOS prices. However, the turnaround on the housing market has clearly been on the strong side of Norges Bank’s expectations; to recap, Norges Bank has anticipated near-term growth rates of around 0.1 percent m-o-m. While household debt growth has been lower than expected by Norges Bank, the sharp turnaround on the housing market is likely to cause increasing concern over financial stability. In our view, Norges Bank will see this as further reason to raise the policy rate in September. Digging further into the details, we are careful not to exaggerate the price improvements seen over the past few months. As stated several times previously, Oslo has been at the forefront of the improvements so far this year. However, according to seasonally adjusted figures, the monthly pace (Oslo) has softened a bit over the past two months. Now, we can see that the supply of existing homes for sale in Oslo has increased from low levels at the start of the year and there are reasons to believe that the supply will increase further, driven by completions of new units. In addition, population growth is low and Norges Bank is expected to raise its policy rate after this summer. The sum of these factors suggests a more moderate price increase going forward.


Marius Gonsholt Hov

Senior Economist


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