During the year to end-Q3 2013, the nationwide house price index rose by 2.95%, the slowest y-o-y increase since Q3 2009, according to Statistics Norway. In inflation-adjusted terms, house prices actually dropped by 0.11% over the same period. House prices fell by 1.76% (-2.04% inflation-adjusted) in Q3 2013 from the previous quarter.
In Q3 2013:
- Oslo’s house price index rose by just 0.7% y-o-y, but dropped 1.9% during the latest quarter.
- In Stavanger, house prices fell 0.3% y-o-y and dropped by 1.9% q-o-q.
- Bergen’s price index rose by 6.4% from a year earlier but dropped by 1.8% from the previous quarter.
- In Trondheim, the house price index increased by 5% y-o-y, but fell by 0.1% q-o-q.
Of Norway’s regions, Akershus excluding Bærum and Trøndelag exluding Trondheim had the highest annual price growth at 6.6%. On the other hand, only Agder and Rogaland excluding Stavanger and Nord-Norge had seen y-o-y house price falls of 0.2% and 0.1%, respectively.
In the third quarter of 2013, the average price of dwellings sold was NOK3 million (US$490,320) while the average price of holiday homes on an owned site was NOK1.4 million (US$228,820), according to Statistics Norway.
Housing demand is also falling. In the third quarter of 2013, the total number of dwellings sold fell by 3% to 25,900 from the same period last year. Likewise, the total number of holiday homes sold also decreased by 3% y-o-y to 3,400 units over the same period. There were a total of 48,800 registered transfer of real property in the third quarter of 2013, slightly down by 0.8% from a year earlier.
Residential construction activity has also slightly declined. From January to October 2013, the total number of dwelling starts fell by 1.2% from the same period last year, according to Statistics Norway.
Robert Shiller warned last year that Norway’s housing market was in the grip of a bubble. Nordea Bank AB, Scandinavia’s biggest lender, has projected that Norwegian property prices will plunge by as much as 20% over the next two years. On the other hand, DNB ASA, Norway’s biggest bank, expects house prices to rise next year.
“We don’t expect any sharp decrease in house prices but actually believe there might be a very limited price increase and potential upside for 2014 and stable prices in the year or two after that,” said DNB ASA’s CEO Rune Bjerke. Bjerke said that Norway will avoid a housing slump thanks to its low unemployment, low interest rates and population growth.
The Norwegian economy expanded by 1.6% in 2013, from real GDP growth rates of 3% in 2012, 1.3% in 2011, and 0.24% in 2010, according to the International Monetary Fund (IMF). Economic growth is expected to be 2.3% in 2014.
Analysis of Norway Residential Property Market »
Properties in Oslo can cost you around €5,000 to €6,700 per sq. m., depending on the size of the property; monthly rents are around €750 to €2,400. Bergen and Fjords’ rental markets offer a cheaper alternative, with properties costing €2,200 to €3,500 per sq. m. and monthly rents ranging from €450 to €1,200.
Capital Gains: Capital gains from the sale of real estate property are taxed as ordinary income at 28%.
Inheritance: Norwegian inheritance tax is is levied at progressive rates, depending on the relationship between the beneficiary and the deceased.
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.
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.
Norway is the world’s seventh largest oil exporter and second largest gas exporter. Norway’s large petroleum industry, plus soaring oil prices, have kept the economy vibrant. Since 1990, Norway has only experienced one year's recession - in 2009 it contracted by 1.4%. Norway's economic expansion averaging 5% between 1994 and 1997. Even during the economic slowdown in 2002 and 2003, economic growth was maintained with annual GDP increases not lower than 1%. Later on, high oil prices helped Norway to expand by an average of 2.9% from 2004 to 2007.
The Norwegian economy is estimated to have expanded by 1.6% in 2013, from real GDP growth rates of 3% in 2012, 1.3% in 2011, and 0.24% in 2010, according to the International Monetary Fund (IMF). Economic growth is expected to be 2.3% in 2014.
The oil and gas sector, which accounts for about 22% of the country’s national income, will play a major role in Norway’s robust economic growth, keeping it buoyant amidst euro zone’s debt troubles. Oil and gas investments are expected to rise to NOK 223.3 billion (US$36.5 billion) in 2014, about 5.4% more than this year, according to Statistics Norway.
The country’s unemployment rate was 3.3% in November 2013, according to Statistics Norway.
The central bank’s key policy rate was unchanged at a record low of 1.5% in December 2013, on hold since March 2012. Since Norway is not a member of the European Union and the euro zone, it is free to set its own fiscal and monetary policies.
In September 2013, the country’s headline inflation rate stood at 2.8%, down from 3.2% in the previous month, mainly influenced by the price movements in clothing, food, and airfares, according to Statistics Norway.
Norway’s nationwide inflation rate is expected to have been 1.8% in 2013, before moderating to 1.5% in 2014, according to Norges Bank, the country’s central bank.