Real Estate Norway`s forecast for the housing market in 2024 is an increase of 4 per cent.
Eiendom Norge's forecast for the housing market in 2024 is an increase of 4 per cent.
The forecast is based on an expected development in nominal house prices through 2024 (12-month growth).
- Eiendom Norge expects an increase in housing prices in Norway next year. Certain cities will see stronger development than the national one, and we believe that Oslo and Stavanger in particular will stand out. Here we expect house prices to rise by 6 and 7 per cent respectively, says CEO of Eiendom Norge, Henning Lauridsen.
- In 2023, we have had major fluctuations in house price developments throughout the year, and at the end of November house prices this year have risen by 1.3 per cent. With growth in the CPI in the same period of 4.5 per cent, this implies a fall in real estate prices, he says.
- After two years of weak development, we believe that we will see good growth in housing prices in Norway in 2024. A good wage settlement that gives real wage growth next year will have a positive effect on price development. So do expected interest rate cuts.
- There is also less uncertainty about inflation, interest rates and housing costs now than at the same time last year. All this means that we are positive about the outlook for housing prices in the country under one next year, says Lauridsen.
The housing crisis is upon us, but not in 2024
At the end of November, the construction of only 11,000 homes has started in Norway in 2023, according to the housing manufacturers. This is the lowest number of new housing starts since the banking crisis at the end of the 80s.
- This means that we will have low housing construction in the coming years and a crisis for the construction industry. However, we will only see the consequences for the housing market from 2025, when there will be a steep drop in the number of completed homes. We believe this will result in strong house price growth in 2025 and 2026. Paradoxically, Norges Bank's aggressive monetary policy means that the house price rebound may be even stronger because it dampens house building even more. In 2024, however, a number of homes that are currently under construction and that were sold during the pandemic will still be completed, says Lauridsen.
- We believe that housing investment will fall much more next year than what the government assumed in the state budget and Norges Bank in its latest monetary policy report, where they only expect a fall of around 6 percent. The extremely low initiation of housing projects this year will mean that the construction industry will have little to do in 2024 when they have completed the projects that were started 2-3 years ago, he says.
- No matter what the decline in housing investment ends up being, this will mean a strong setback for the Norwegian economy with weak development in GDP and higher unemployment. If this scenario plays out, we think Norges Bank will be forced to lower interest rates faster than what they are forecasting as of December 2023, says Lauridsen.
Interest rate cuts are imminent
During 2023, the key interest rate from Norges Bank has increased from 2.75 per cent to 4.50 per cent. It is much more than what the interest rate path indicated at the start of the year.
- Norges Bank's interest rate trajectory as of December indicates that the first interest rate cut will come towards the end of 2024. The December increase came as a surprise to most people, and so was the rationale for the strong emphasis on the krone exchange rate. For the time being, Norges Bank gives more weight to the inflation target and the krone exchange rate than to consideration of the economic situation, he says.
- We believe that Norges Bank will at some point be forced to place greater emphasis on the weak prospects for large parts of the Norwegian economy and especially the construction industry. We do not think it is unlikely that the first interest rate cut will come before the summer and we envision three interest rate cuts next year, he says.
Forecasts for the big cities
Our forecasts for the 12-month growth in 2024 for the major cities are:
Oslo: Increase of 6 per cent
Bergen: Increase of 3.5 per cent
Trondheim: Increase of 2.5 per cent
Stavanger: Increase of 7 per cent
Tromsø: Increase of 1 per cent
- Oslo has been stronger in 2023 than both the rest of the country and what most expected at the start of the year. Although the interest rate is significantly higher now, we expect that interest rate cuts will have a greater effect on price developments here than elsewhere in the country, and the development may be particularly strong beyond the autumn. In 2025, and especially in 2026, price growth can be very high as a result of very few homes being completed, says Lauridsen.
- Population growth is back in Bergen after the pandemic, while completed housing is at an even level. Nor has Bergen had the big movements in the supply of second-hand homes like other cities. This means that we expect an increase of 3.5 per cent in 2024, says Lauridsen.
- In the second-hand housing market in Trondheim, there has been a large increase in supply throughout the autumn and we will probably enter 2024 with a large supply side. Moreover, the number of completed homes here has been more stable than in other cities. This means that we believe the price trend will be somewhat weaker than the rest of the country. Our forecast is an increase of 2.5 per cent in 2024, says Lauridsen.
- Together with Kristiansand, Stavanger will see the strongest development in Norway in 2023. We expect that Stavanger will also see strong development in 2024 and that prices will rise by 7 percent here. We justify this by the fact that the weak development in the housing market in the region after the oil brake in 2014 gives room for an upside when the oil and gas industry experiences great optimism again, says Lauridsen.
- Tromsø has had a weak development in housing prices in 2023, and they enter the new year with a record supply side. Many new homes have also been completed in Tromsø in the past year, while population growth is not as strong as in other parts of the country. This means that we believe we will see a slight rise in housing prices in Tromsø of 1 per cent in 2024, says Lauridsen.