Norway’s Economic Outlook: Higher Interest Rates Impacting Households and Real Estate, Says Norges Bank

This is revealed by the semi-annual report of Norges Financial Stability Bank, which was published on Wednesday. There, central bank governor Ida Wolden Bache writes that most individuals and private companies in Norway have faced times of higher interest rates and rising prices.

– Norway’s financial system is strong, says Bache in a press release.

Norges Bank now says that real wage growth and lower lending rates are expected from the first quarter of next year, which will affect households’ ability to pay their debts. However, unemployment is expected to rise slightly, to the same level as before the pandemic.

However, there is a lot of uncertainty related to economic development and international geopolitical conditions.

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One area Norges Bank devotes a lot of space to is real estate and commercial property developments. It has been a challenging time for players in these industries in an era of high interest rates and price pressure.

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The central bank now expects slightly better prospects for commercial real estate in the future, but challenging times remain for real estate developers.

– Since the beginning of last year, the proportion of breaches in Norwegian companies has increased. There has been a particular uptick among property developers, whose profitability has weakened due to higher interest rates and high construction costs, and because few new homes are being built and sold, the bank writing in the report.