Norwegian Housing Market Sees Further Decline

The 0.4 percent increase in house prices marks the weakest August performance in the history of housing price statistics kept by Real Estate Norway. However, adjusted for seasonal variations, housing prices saw a 0.6 percent decline. At the end of August, the average price of a home in Norway was 4.53 million kroner. 

Henning Lauridsen, the managing director of Eiendom Norge, attributed this trend to the impact of rising interest rates. "The interest rate increases are now starting to bite housing prices," Lauridsen said. While the first part of 2023 contributed to a favourable trajectory in housing prices in Norway, with an overall 5.7 percent increase, August's figures hint at a shift in momentum.

In Oslo, prices registered a notable 1.0 percent decline during the previous month, translating to a 1.4 percent drop when adjusted for seasonal fluctuations. Meanwhile, Bergen delivered the strongest set of figures. There, house prices rose by 1.2 percent when adjusted for seasonal development.

Kjetil Olsen, Chief Economist at Nordea Markets, interpreted the recent data as a sign that the effect of interest rate hikes is beginning to take hold. "Another indication that interest rate increases are beginning to bite. So far, we have been waiting a bit for this. (This) joins the series of indications that the autumn will be a bit tough for the Norwegian economy and the housing market," Olsen said.

Lauridsen echoed Olsen's concerns about the future trajectory of housing prices, expecting a softer development beyond the autumn. Norway's Central Bank (Norges Bank) initiated a flurry of interest rate hikes to bring down inflation - culminating in a policy rate of 4 percent in August - followed by corresponding mortgage interest rate adjustments by commercial banks in the country.

The interest rate hikes are starting to visibly affect the Norwegian real estate market, with fewer and fewer people buying new homes and the construction of new homes stalling in turn. July saw a 1.1 percent decline in housing prices, but a seasonally adjusted 0.2 percent rise. June saw a 1.2 percent decrease in housing prices following a modest 0.8 percent increase in May.