Market in Depth

Norway's house price rises decelerating

Lalaine C. Delmendo | January 24, 2020

After a decade of uninterrupted house price rises Norway's housing market is stabilizing, due to stricter mortgage rules and rising interest rates.

The nationwide house price index rose by a modest 2.35% during the year to Q3 2019, according to Statistics Norway. When adjusted for inflation, Norwegian house prices increased by a meagre 0.69% y-o-y in Q3 2019. During the last quarter nationwide house prices actually fell by 0.8% (-1.1% inflation-adjusted).

Oslo including Bærum had the highest house price increases in the country, at 3.7% annually (2.02% inflation-adjusted) during the year to Q3 2019, a slight slowdown from a 4.01% growth (-1.93% inflation-adjusted) during the same period in 2018.

During the year to Q3 2019:
  • In Bergen, the house price index rose by 2.22% y-o-y (0.57% inflation-adjusted), up from a 0.88% annual rise in Q3 2018. But during the latest quarter, house prices fell by 0.94% from the previous quarter (-1.29% inflation-adjusted).
  • In Trondheim, house prices rose by 1.72% y-o-y (0.08% inflation-adjusted), in contrast with a 0.27% drop in Q3 2018. In Q3 2019, house prices increased 0.9% q-o-q (0.54% inflation-adjusted).
  • In Stavanger, house prices rose by 0.92% y-o-y (-0.71% inflation-adjusted), compared to a 1.14% annual increase in Q3 2018. During the latest quarter, local house prices fell by 2.28% q-o-q (-2.63% inflation-adjusted).

Of the country's regions, Sør-Østlandet had the highest annual price increase at a modest 3.12% (1.45% inflation-adjusted), followed by Akershus excluding Bærum (2.76%) and Agder and Rogaland excluding Stavanger (1.98%).There were minimal annual price hikes in Nord-Norge (1.37%), Vestlandet excluding Bergen (1.23%), and Trøndelagexluding Trondheim (0.63%). On the other hand, house prices were unchanged in Hedmark and Oppland.

Demand continues to rise. Residential property sales in Norway rose by 4.6% to 65,214 units in the first three quarters of 2019, compared to the same period in 2018, according to Statistics Norway. In Oslo, sales soared by 23.5%.

Despite this, construction remains weak. Dwelling completions fell by 5.4% y-o-y in the first eleven months of 2019 while starts rose by 3.7%, according to Statistics Norway.

In 2019, Norway's mainland GDP, which excludes the volatile oil and shipping sectors, was estimated to have expanded by 2.5%, following 2.5% in 2018, and 2.4% in 2017, according to Norges Bank.

Slower growth ahead is expected - GDP growth is likely to slow to 2% in 2020 and to 1.7% in 2021, according to Organisation for Economic Cooperation and Development (OECD). Statistics Norway forecasts 2.4% growth in 2020 and 1.9% in 2021.

Anyone can own, occupy, and invest in real estate in Norway.

Analysis of Norway Residential Property Market »

Rental Yields

Oslo's rental yields are low(ish) - max of 4.6%

Yields for residential properties in Oslo range from 3.1% to 4.6%, with smaller properties yielding more than larger properties. After 8 years of continuous house price increases in Norway, Oslo's residential property prices are very high, making Oslo the world's 17th most expensive city in which to buy a home but this year there has been a decline in prices.

Properties in Oslo may cost around €7,500 to €8,300 per sq. m., depending on the size of the property, and with wide variations outside this band; monthly rents are around €1,300 to €2,600 for properties in Oslo between 45 square metres (sq. m.) and 120 sq. m.. Bergen and Fjords’ property markets of course offer cheaper alternatives.

In terms of residential prices, we believe that Oslo is the eighth most expensive capital in Europe, and not surprisingly has some of the lowest rental yields of any of Europe's capitals. Transaction costs are low in Norway.

Read Rental Yields »

Taxes and Costs

Taxes are generally high

Rental Income: Rental income of nonresidents is taxed at a flat rate of 22%.

Capital Gains: Capital gains from the sale of real estate property are taxed as ordinary income at 22%.

Inheritance: Norwegian inheritance and gift taxes were abolished as of 01 January 2014.

Inheritance of spouses is not taxed. Inheritance of children and parents exceeding NOR470,000 (€62,710) are taxed from 6% to 10%.

Residents: Residents are taxed on their worldwide income.

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Buying Guide

Total transaction costs are very low in Norway

Total transactions costs range from 3.75% to 5.63%, according to Global Property Guide estimates. The buyer pays all costs involved, including the 2.5% stamp duty. Real estate agent’s fee is around 1% to 2.5% (plus 25% VAT).

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Landlord and Tenant

Tenant protection laws are neutral

Norwegian law is neutral between landlord and tenant.

Rents: The rental market is free; the Law of Tenancy (2000) removed the last rent controls, with the exception of Oslo pre-war housing. Rents are comparable with that normally obtained in agreements in new lettings of similar properties in similar terms. In practice, this is not onerous to landlords.

Tenant Security: Notice is not required at the end of the contract if the contract was fixed term. However, if the tenant continues to occupy the premises for more than 3 months at the end of the contract and the landlord does nothing about it, then the agreement becomes an unspecified term agreement.

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Modest economic growth; low employment

Norway’s mainland GDP, which excludes the volatile oil and shipping sectors, expanded by 2.5% in 2019, following growth of 2.5% in 2018, and 2.4% in 2017, according to the central bank.

“Growth in the Norwegian economy has been solid since 2016,” Norges Bank said. “The global upturn, improved cost-competitiveness, and higher oil prices have helped lift activity, as have low interest rates.”

Norway GDP inflation
Norway’s petroleum industry is the country’s largest industry, accounting for more than 20% of GDP, and around 47% of exports by value. Norway’s mainland GDP grew by just 0.4% in 2015 and 0.3% in 2016.

Europe’s Brent crude oil spot price averaged US$63.21 per barrel in November 2019, down from 2.4% a year earlier and far below the average price of US$107.64 per barrel from 2011 to 2014.

Economic growth is projected to slow again in the next two years, due to a slowdown in global trade and investment, according to the Organisation for Economic Cooperation and Development (OECD). The OECD expects Norway’s mainland GDP to grow by 2% in 2020 and to 1.7% in 2021. This is below the Statistics Norway’s forecast of 2.4% growth in 2020 and 1.9% in 2021.

In the past five years, the Norwegian Krone (NOK) has depreciated by about 10.6% against the euro, from NOK 8.9727 = EUR 1 in December 2014 to NOK 10.0388 = EUR 1 in December 2019.

The krone lost 19.4% of its value against the US dollar over the same period, from NOK 7.2787 = USD 1 to NOK 9.0324 = USD 1 last month.

Norway crude oil prices
Unemployment was around 3.8% in October 2019, down from 4% a year earlier, according to Statistics Norway.

Inflation was 1.6% in November 2019, sharply down from last year’s 3.5% and well below the Norges Bank’s target of 2%, according to Statistics Norway. Inflation averaged 2.1% from 2009 to 2018.