Housing, Housing Prices | Towards a shock spring in Oslo’s housing market

Housing prices in Oslo may rise even more in the future. – Keep your head cool in the bidding rounds, recommends financial expert.

KVADRATUREN (Nettavisen Økonomi): House prices continue to rise with undiminished strength, and the rise is strongest in Oslo.

Recent figures from Eiendom Norge shows that prices in February were up as much as 3.5 per cent, and in the past year the price increase in the capital is a staggering 15.2 per cent.

But annual growth in Oslo will certainly be stronger in the next two months, because the first two months of the corona pandemic last year gave weak housing numbers.

Read also: Housing peaks predict price shock in Oslo

18-20 percent

– We expect it is likely that we will see a growth of 18-20 percent during March / April. March last year had a nominal and seasonally adjusted decline of 1.4 percent. If we get an increase of 1.5 percent, we are up 3 percentage points. And with an increase in April, we are quickly below 20 percent, says CEO Henning Lauridsen of Eiendom Norge to Nettavisen Økonomi.

– Then we expect that the annual growth will peak out and creep down until the autumn, he continues. This will happen, because the price increase last year gradually became strong. Most housing experts expect declining price growth over the year.

Also read: Nordea predicts interest rate shocks for Norwegians

If your home was worth NOK 5 million in April 2020, it could be worth NOK 6 million in a couple of months. This is an increase of almost two average annual salaries.

Finance expert Hallgeir Kvadsheim now recommends eager home buyers to keep a cool head, there will soon be some cooler months.

Hesebelesende

– There are relatively few for sale and hesitant bidding rounds in Oslo. Normally there are more for sale after Easter. In addition, we will get more articles about rising interest rates, which can also cool down the market a bit.

– But that does not mean that average prices fall. It just means that there may be “only” two bidders and not four or five, as now, when you buy a home in Oslo, says Kvadsheim.

The latter is important. Kvadsheim warns that if you get carried away and increase the bids by several hundred thousand kroner, you risk spending more time “collecting” the rigid purchase price.

Do not stress

– So take a step back, feel free to follow the market, go to screenings, but do not stress, is the clear recommendation

In any case, there is a strong rise in prices in Oslo this year. Eiendom Norge has foreseen an increase of 9.5 per cent this year, but it may be stronger. Lauridsen says that inflation in January was slightly weaker than expected, while February growth was markedly stronger.

So far this year, Oslo prices have risen by 6.2 per cent, while Eiendom Norge had estimated a growth of 4.5 per cent.

Read also: Nordea predicts interest rate shock for Norwegians

Remove the norm

– But is there anything you can do in Oslo in the short term to alleviate the price pressure?

– The only thing we can do is simply remove the apartment norm. It has two provisions that are problematic, such as that you can not go under 35 square meters. The Planning and Building Act sets many requirements for the homes to be good enough to satisfy the government requirements.

– The second is the provision that 40 percent of the homes must be over 80 square meters. Then we know that the apartment norm applies in four districts, but it is also practiced partly outside these districts.

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Softens up?

– With a larger number of the housing types that are most in demand in the market, it will be able to curb inflation somewhat, Lauridsen answers.

Acting Urban Development Agency Arild Hermstad (MDG) has signaled to E24 that it may be relevant with some softening.

– But there are few homes regulated in Oslo?

– Yes, and we will see that propagate forward with a housing production of plus / minus 2500 homes over the next two years. Then we just have to expect strong growth.

Many years

It can take ten years from the housing developers buy a plot until the homes are sold. On average, it takes 4.5 years for the political processing of a housing project in Oslo, including the time the planning authorities spend processing the project.

And now the past is beginning to catch up with the Oslo market in earnest. In 2018, a record low 810 new homes were approved in Oslo. This is around one-fifth of what is estimated as an annual housing need in the capital. The following year, the number of regulations was increased to about 2,000, but still only half of the need.

Then we have another prism mechanism. The National Research Institute for Housing, Housing Lab, has pointed out that in periods of rapidly rising house prices, buy people in much stronger gad a new home before selling the old one. This leads to a shortage of housing, which is price-driving. Lauridsen downplays this meaning.

Read also: Recent survey: Three out of ten fear a home stool

Stable tall

– There are relatively stable figures for the proportion who buy first. This share increases somewhat when house prices rise, but the norm in Norway is that you buy first and sell afterwards, and then you have these small distortions.

Then we have the rental homes. The red-green city council in Oslo will tighten further for secondary housing by introducing stricter taxation.

Acting Urban Development Agency Arild Hermstad (MDG) has pointed out several times favorable taxation of secondary residences and record low interest rates as the main explanation for the sharp rise in prices in Oslo. He most recently did so in Aftenposten a few days ago.

Lauridsen does not believe stricter taxation of rental housing will solve the basic housing problems in Oslo.

30 percent

– The proportion of rental housing in Oslo has been around 30 per cent for the past 20 years. It is probably an expression of the demand for rental housing. By tightening rental housing or making it less attractive to rent out, there will probably be an increase in price growth for the rental housing that is left.

Lauridsen also points out that price growth in the rental market is much more moderate and much more in balance than the market for buying and selling.

Read also: Crisis in Oslo’s housing market: – Completely empty for some types of apartments

– If you remove part of the offer, it will have a price effect on what is left. I think one just has to forget to believe that the rental market and the market for buying and selling do not have a connection.

– If you do something with one market, the other market is also affected. And when it comes to wealth taxation, there is a strong taxation of rental housing. It is not as favorable as I think many people think it actually is, and at least not as favorable as it was a few years ago, says Lauridsen.

Nest hardest

In fact, only bank deposits today are taxed more heavily than rental housing and commercial real estate. Money in the bank is fully valued in excess of the tax bill, while rental housing and commercial real estate are valued at 90 per cent.

In 2012, landlords escaped with only 40 percent of the values ​​above the tax return. But despite a much tougher valuation of secondary housing, house prices in Oslo have doubled since 2012, to 87,000 kroner per square meter this February.

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