Real Estate Norway's forecast for the norwegian housing market is an increase of 4 per cent.
The forecast is based on an expected development in nominal prices through 2022 (12-month growth).
- Eiendom Norge expects a rise in house prices in Norway next year. Some cities will have a stronger rise, which in total will give a moderate rise in house prices in the country as a whole in 2022. We expect that Oslo will have a somewhat weaker development in 2022 than the other large cities, says CEO of Eiendom Norge , Henning Lauridsen.
- Interest rates are of great importance for house prices and higher interest rates in 2022 will reduce inflation compared to 2020 and 2021. Increased interest expenses for homeowners in combination with stable housing construction and low population growth indicate a more moderate price development than we have seen in the last two years. especially in Oslo, he says.
- At the same time, there is great uncertainty about increased energy prices, inflation and housing needs due to lower population growth, as well as the further course of the pandemic. All of this gives a greater downside than an upside to house prices in our assessment, he says.
The interest rate path remains
Norges Bank's interest rate spread as of December 2021 indicates three more interest rate increases in 2022 in addition to the two in 2021. At the end of 2022, the key interest rate will be 1.25 per cent.
- At the interest rate meeting in December, Norges Bank stood by both the interest rate decision and the main features of the interest rate path. We interpret this as meaning that the central bank is ready for interest rates to normalize. In our view, this is a correct assessment, as there are many indications that very low interest rates are counterproductive. It stimulates the economy to a small extent and instead contributes to increased prices for real estate and shares and greater inequality in society, says Lauridsen.
Moderate housing construction and weaker population development
New home sales will end at around 30,000 new homes sold in 2021. This is high in light of the lower population growth and a sharp increase in construction costs.
- The somewhat weaker new home sales in 2020 and 2021 will result in somewhat lower housing construction in the coming years, but at the same time population growth has also been reduced, which results in lower housing needs. In our view, there is now great uncertainty about the population projections and housing needs analyzes, and what will be a new normal when the pandemic one day is over, says Lauridsen.
- Even if we were to have lower population growth in the years to come, it is possible that housing demand will still be high, as Norwegians largely prioritize their own homes and holiday homes. This will be an important factor to follow in the future, he says.
Lending regulation is fixed in 2022
There is a close connection between house prices and debt, and much of the growth in house prices in Oslo in 2020 can probably be explained by the fact that the lending regulations were relaxed in the second and third quarters of 2020. Many in the capital used this opportunity to take out more mortgages.
- Even though we want relief in lending regulation, especially for first-time buyers, we are satisfied that there is a certain predictability in the supply of credit. The lending regulations will have a neutral effect on the housing market in 2022, says Lauridsen.
- An element of uncertainty on the credit side in 2022 is the Housing Bank, which the government wants to renew. At present, it is unclear what the government's ambitions here will mean in practice. According to Eiendom Norge's assessment, it will be wiser to make relief for first-time buyers in the lending regulations, as well as reduce the document fee for first-home purchases. This will lower the threshold for becoming a homeowner in Norway, he says.
Forecasts for the big cities
Our forecasts for the 12-month growth from January to December 2022 for the big cities are:
Oslo: Increase of 3 percent
Bergen: Increase of 6 percent
Trondheim: Increase of 5.5 percent
Stavanger: Increase of 6 percent
- Higher interest rates hit Oslo harder than other cities due to high prices and debt levels. In addition, there are both signs of changed housing demand during the pandemic and significantly lower population growth in Oslo. Overall, there is a lot of construction activity in Oslo and Viken, and the housing markets here must be seen in context. Many who would buy in Oslo, if they had the opportunity, now buy in the surrounding municipalities. Therefore, we expect that house prices will rise less in Oslo than the other cities, says Lauridsen.
- At the beginning of 2022, the supply side in Bergen is lower than in previous years. At the same time, housing production is declining, while population growth has picked up somewhat again after several weak years. This in combination we believe will contribute to a good increase in house prices in Bergen in 2022, says Lauridsen.
- Trondheim has had strong growth in house prices in 2021. Now housing production in Trondheim is declining after high levels for several years, at the same time as population and household growth has declined and stabilized. At the end of 2021, the supply side in Trondheim is at a low level. This means that we expect a weaker rise in house prices here in 2022 than in 2021, says Lauridsen.
- Low interest rates and increased activity in the oil and gas sector have meant that the housing market in Stavanger is back after a very weak development from 2013 to 2019. Despite the weak development and low population growth in these years, housing production in Stavanger has been high. The supply of second-hand homes has declined markedly throughout the year. This means that we believe in a continued rise in prices in 2022 after the positive development in 2021, Lauridsen concludes.