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Norway: Overview

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Last Updated: Nov 16, 2007

Norway’s house prices surge ahead

An extremely nervous housing market saw a 1.2% decline in house prices in October, the third consecutive monthly fall, according to the Norwegian Association of Real Estate Agents. After a dramatic surge in house prices in 2006 and early 2007, the property boom appears to be pausing. However, Norwegian house prices are still 5.4 per cent above October 2006 prices.

The Norwegian economy is very strong, and this is part of the problem. GDP growth will be above 4% for 2007, according to Norges Bank. Unemployment is down to 2.5% of the workforce, much lower that the European average, according to a recent survey by Statistics Norway (Statistisk Sentralbyrå).

Yet base interest rates were held at 5% in the most recent Norges Bank (central bank) hearing, taking into consideration the turbulent world economy and the global credit crisis.

The market is anxious. There is an all-time high of properties on the market. Norwegian house prices have risen 48.82% over the five years 2001-2006, and 149.54% over the 10 years 1996-2006.

Norway’s mortgage market is largely dominated by floating rate loans, so is highly impacted by interest rate changes. Private mortgage companies offered average rates of around 5.10% in June 2007, an increase of around 1% on a year earlier.

Individuals and entities of all types are legally entitled to own, occupy, and invest in real estate.

Read Price History  »

RENTAL YIELDS

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.

Read Rental Yields  »

TAXES AND COSTS

Taxes are generally high

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.

Read Taxes and Costs  »

BUYING GUIDE

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).

Read Buying Guide  »

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.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Oil reserves and gas lifts the economy

Norway is Europe’s most sparsely populated country apart from Iceland. Its 4.7 million inhabitants are spread over an area the size of Germany. Income per capita is the third highest in the world (at US$65,785) after Luxembourg and the United States – thanks mainly to its huge offshore oil reserves and natural gas which account for 17% of GDP and 45% 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.’

Despite the fluctuations in terms of GDP growth, the Norway never entered into a recession since 1990. Thee economy expanded by more than 5% between 1994 and 1997. Even with a slowdown in 2002 and 2003, GDP growth rate was never below 1% since 2000. Real wages also increased by an average of 4.3% annually 1991 to 2005 with strong increases in 1998 (7.6% real wage growth), 2001 (7.4%) and 1999 (6.2%). 2007 GDP growth is expected to be around 4%.

 

  • Strong and stable economy
  • Low transaction costs
  • Tenant-neutral rental market
  • Low rental yields in Oslo
  • High rental income tax

RESIDENTIAL PROPERTY FACTS
Price (sq.m): €5,117 For a 120 sq. m. property, usually an apartment. Rental Yield: 4.22% For a 120 sq. m. property, usually an apartment.
Rent/month: €2,160 For a 120 sq. m. property. Income Tax: 26.86% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
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.

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