Norway: Overview
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- Buying Guide
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Rising interest rates slow Norway’s housing market
Norway’s once hot housing market is rapidly cooling. The rapid increase in oil prices in recent years, and strong economic growth, had helped fuel house price booms in several key cities in Norway. But in Q1 2008, the overall house price index rose by a mere 2.9% from a year earlier. When adjusted for inflation, house prices actually dropped marginally (-0.28%) over the same period.
The price rise in Q1 2008 was a far cry from the 16.7% (15.4% in real terms) y-o-y rise to Q1 2007. House prices had risen strongly from 2004 to 2007; the over-all house price index rose 10% (9.7% in real terms) in 2004, 8.3% (6.6%) in 2005, 13.3% (11%) in 2006 and 12.3% (11.2%) in 2007.
Rising interest rates and inflation led to the cooling of the housing market. Norway’s mortgage market is largely dominated by floating rate loans, so is highly impacted by interest rate changes. Since mid-2006, interest rates on mortgages have inched up from below 4%, to more than 6.5% in Q1 2008.
Individuals and entities of all types are legally entitled to own, occupy, and invest in real estate.
RENTAL YIELDS
Last Updated: Jun 13, 2006
Yields are low, max of 5%
Yields for properties in Oslo range from 3.6% to 5%. Properties in Bergen and Fjords areas have similar yields, at 3.9% - 4.2%.
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.
TAXES AND COSTS
Last Updated: Jan 08, 2008
Taxes are generally high
Effective Tax Rate on Rental Income |
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| Monthly Income | €1,500 | €6,000 | €12,000 |
| Tax Rate | 26.9% | 30.0% | 31.1% |
| Click here to see a worked example | |||
Source:![]() |
Disclaimer | ||
Rental Income: Rental income of non-residents is taxed at a flat rate of 28%.
Capital Gains: Capital gains from the sale of real estate property are taxed as ordinary income at 28%.
Inheritance: Norwegian inheritance tax is levied at progressive rates, ranging from 8% to 30%, depending on the relationship between the beneficiary and the deceased.
Residents: Residents are taxed on their worldwide income.
BUYING GUIDE
Last Updated: Nov 09, 2006
Total transaction costs are very low in Norway
Total transactions costs range from 3.75% to 5.7%, 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% - 2.5% (plus 24% VAT).
LANDLORD AND TENANT
Last Updated: Nov 29, 2006
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.
ECONOMIC GROWTH
Last Updated: Jul 16, 2008
Oil reserves and gas lifts the economy
Norway is Europe’s most sparsely populated country, apart from Iceland. Its 4.6 million inhabitants are spread over an area the size of Germany. Income per capita is one of the highest in the world at US$83,922 in 2007 – thanks mainly to its huge offshore oil reserves and natural gas which account for 17% of GDP and 65% of exports.
Norway is the only Scandinavian country that is not a member of the European Union (EU). Norwegians voted against membership of the then European Economic Cooperation in 1972 and of the EU in 1994, despite vigorous campaign of the government to vote ‘yes.’
With the oil windfall, the government adopted an expansionary fiscal policy that boosted economic growth. From 2004 to 2006, the economy expanded by an average of 3% annually. In 2007, GDP growth was 3.5%.
Unemployment dropped to 2.5% in 2007, the lowest rate in almost two decades and much lower that of the European average. Fearing that the economy might overheat, the Norges Bank (the central bank) initiated monetary tightening with gradual interest rate hikes since late-2005.
The Norges Bank’s key rate, the official sight deposit, rose from 2.25% in Oct 2005 to 3.38% in Dec 2006. More aggressive interest rate hikes were implemented in 2007 with the key rate at 5.14% Dec 2007.
Combined with the steady appreciation of the Danish kronor against the US dollar (to a certain extent the euro), inflationary pressures were kept at bay. Inflation in 2007 was only 0.8%, down from 2.26% in 2006.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Looming housing slump in China
America & Caribbean
The great U.S. housing market crash
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): n.a. | Rental Yield: n.a. |
| Rent/month: n.a. | Income Tax: 26.86% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
5.1%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 25.9% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice. | |
JANUARY 2007
- Norwegian central bank raises key interest rate to 3.75 per cent - M&C Business News
SEPTEMBER 2006
- Record prices in housing market - Borsen Online
AUGUST 2006
- Norway: Rate hikes to continue despite low inflation - FX Street
- World’s most expensive again - Aftenposten
JULY 2006
- Norwegian debt increasing - Aftenposten
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