Market in Depth

Norway's housing market stabilizing

Lalaine C. Delmendo | February 03, 2019

After almost eight years of uninterrupted growth, Norway's housing market is now stabilizing, amidst almost stable demand, weak construction activity, stricter mortgage rules and gradually rising mortgage rates.

The nationwide house price index rose by 2.27% during 2018, after y-o-y rises of 0.73% in 2017, 10.09% in 2016, 4.54% in 2015, and 5.8% in 2014, according to Statistics Norway. When adjusted for inflation, Norwegian house prices increased by a meagre 0.16% in 2018. During the last quarter, nationwide house prices fell by 2.35% (-3.27% inflation-adjusted).

Oslo including Bærum had the highest annual price increase at 4.45% (2.28% inflation-adjusted) in 2018, a striking contrast with a decline of 3.01% (-5.16% inflation-adjusted) during the previous year, 2017. However, house prices in the capital city dropped 2.05% (2.97%) q-o-q in Q4 2018.
In 2018:
  • In Bergen, the house price index rose slightly by 1.51% y-o-y (but dropped 0.59% inflation-adjusted), an improvement from a 2.07% decline in 2017. During the latest quarter, house prices fell by 2.42% in from the previous quarter (-3.34% inflation-adjusted).
  • In Trondheim, house prices rose by 3.37% y-o-y (1.23% inflation-adjusted), in contrast with a 1.39% drop in 2017. In Q4 2018, house prices increased slightly by 0.18% q-o-q (-0.76% inflation-adjusted).
  • In Stavanger, house prices fell by 3.31% y-o-y (-5.31% inflation-adjusted), in contrast with a 3.75% annual increase in 2017. During the latest quarter, local house prices fell by 1.33% q-o-q (-2.26% inflation-adjusted).

Of the country's regions, Sør-Østlandet had the highest annual price increase at a modest 2.85% (0.72% inflation-adjusted) in 2018, followed by Akershus excluding Bærum (2.71%), Nord-Norge (2.53%), and Hedmark and Oppland (2.14%). Minimal annual price hikes were seen in Vestlandet excluding Bergen (1.18%), and Agder and Rogaland excluding Stavanger (0.4%). On the other hand, house prices fell by 3.35% in Trøndelag exluding Trondheim.

The average price of detached houses in Norway during 2018 was NOK 24,917 (US$ 2,911) per square metre (sq. m.), up 1.5% from a year earlier, according to Statistics Norway. Row homes' average prices increased 1.4% y-o-y to NOK 33,252 (US$ 3,884) per sq. m. in 2018, and apartments' average prices were up 1.2% y-o-y to NOK 53,404 (US$ 6,238) per sq. m.

In 2018, the total number of residential property sales in Norway dropped slightly by 0.6% from a year earlier. In Oslo, sales fell by 1.2% over the same period.

In 2018, the Norwegian economy is estimated to have expanded by 2.1%, the highest growth in six years, according to the International Monetary Fund (IMF). The economy is projected to grow again by 2.1% this year and by another 1.9% in 2020.

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.

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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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ECONOMIC GROWTH

Modest economic growth; low employment

Norway GDP inflationLow petroleum prices have hurt Norway’s economy in recent years. Norway’s petroleum industry is the country’s largest industry, accounting for more than 20% of GDP, and around 47% of exports by value. As a result of a plunge in petroleum prices in the past several years, the country’s economic growth has been sluggish, with GDP expanding by only 1.1% in 2016 and 1.9% in 2017, after growing by 2% in both 2014 and 2015 and 1% in 2013, according to the International Monetary Fund (IMF).

In 2018, the Norwegian economy is estimated to have expanded by 2.1%, amidst gradual recovery in the oil and gas sector.

The economy is projected to grow by 2.1% this year and by another 1.9% in 2020, according to the IMF.

Europe’s Brent crude oil spot price averaged US$57.36 per barrel in December 2018, far below the average price of US$107.64 per barrel from 2011 to 2014.

In the past four years, the Norwegian Krone (NOK) has depreciated by about 8.5% against the euro, from NOK 8.9727 = EUR 1 in December 2014 to NOK 9.8121 = EUR 1 in December 2018. Over the same period, the krone lost 15.6% of its value against the US dollar, from NOK 7.2787 = USD 1 to NOK 8.6209 = USD 1 last month.

Unemployment was around 3.8% in November 2018, down from 4.1% a year earlier, based on the figures from Statistics Norway. Unemployment is expected to decline to 3.7% this year, according to the IMF.

Nationwide inflation was 3.5% in December 2018, sharply up from last year’s 1.6% and well above the Norges Bank’s target of 2%, according to Statistics Norway. Inflation averaged 2% from 2009 to 2017.