Market in Depth

Norway's house price growth accelerates again

Lalaine C. Delmendo | April 25, 2021

After a brief slowdown in early-2018, Norway's house price growth is accelerating again.  Falling interest rates and limited housing supply are working their magic.

The nationwide house price index rose by 7.11% during 2020, the biggest y-o-y increase since Q2 2017, according to Statistics Norway. When adjusted for inflation, Norwegian house prices rose 5.75% y-o-y in 2020. During the last quarter house prices rose just 0.32% (0.27% inflation-adjusted).

During 2020:
  • In Bergen, the house price index rose by 7.42% (6.06% inflation-adjusted) during 2020 – an improvement from the previous year's 4.16% growth and its best performance in six years. On a quarterly basis, house prices rose slightly by 0.36% (0.3% inflation-adjusted) during the latest quarter.
  • In Oslo including Bærum, the house price index rose by 7.83% during 2020 (6.46% inflation-adjusted), following a 4.58% y-o-y increase in 2019. During the latest quarter, house prices increased 3.08% (3.02% inflation-adjusted).
  • In Stavanger, house prices rose by almost 10% y-o-y (8.57% inflation-adjusted) last year, in sharp contrast to a 3.22% decline in 2019. Quarter-on-quarter, house prices fell by 0.77% in Q4 2020 (-0.83% inflation-adjusted).
  • In Trondheim, house prices rose by 6.43% y-o-y (5.07% inflation-adjusted), up from the prior year's miniscule rise of 0.1%. During the latest quarter, house prices were up by 1.55% in Q4 2020 (1.49% inflation-adjusted).

Of the country's regions, Vestfold and Telemark and Viken excluding Akershus had the highest annual price increase at 10.11%  during 2020 (8.71% inflation-adjusted), followed by Trøndelag excluding Trondheim (8.77%), and Akershus excluding Bærum (7.78.%). More modest house price increases were recorded in Agder and Rogaland excluding Stavanger (5.22%), Innlandet (4.54%), Nord-Norge (3.97%), and MøreogRomsdal and Vestland excluding Bergen (3.39%).

Demand is rising again, after a temporary slowdown in Q1 2020 due to pandemic-related restrictions. During 2020, residential property sales in Norway rose by 3.7% to 96,045 units, according to Statistics Norway, though in Oslo sales were down by 2.5% to 12,417 units.

Despite this, construction remains weak. Dwelling starts fell by 5.8% in 2020 while completions fell 4.1%, according to according to Statistics Norway.


Norway's mainland economy, which excludes the volatile oil and shipping sectors, contracted by 2.5% in 2020, its weakest performance since 1945, due to COVID-19 lockdown measures, according to Statistics Norway - far less severe than most European nations.  The eurozone countries' economies contracted by an average of 6.8% last year.

The Norwegian economy is projected to grow by 3.6% this year, according to the IMF.

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.

Read Taxes and Costs »

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).

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

Economic contraction

Norway’s mainland economy contracted by 2.5% in 2020 (excluding oil and shipping), due to COVID-19 lockdown measures, according to Statistics Norway - its weakest performance since 1945. However, the slowdown was less severe than most eurozone countries, whose economies shrank by an average of 6.8%.

The Norwegian economy is projected to grow by 3.6% this year, based on IMF forecasts.

Norway GDP inflation
Norway’s petroleum industry is improving, with Brent crude spot up almost 12% on the year in February, at US$62.28 per barrel. That’s below the average US$107.64 per barrel from 2011 to 2014, but in April oil had reached a 21-year low of just US$18.38 per barrel!

The petroleum industry is the country’s largest industry, accounting for more than 20% of GDP, and around 47% of exports by value.

In the past seven years, the Norwegian Krone (NOK) has depreciated by about 33.4% against the euro, from NOK 7.5479 = EUR 1 in April 2013 to NOK 11.3369 = EUR 1 in April 2020. The krone lost 44.5% of its value against the US dollar over the same period, from NOK 5.7951 = USD 1 to NOK 10.4335 = USD 1 in April 2020.

Norway crude oil prices
The krone has been appreciating since, gaining 10.2% against the euro to NOK 10.2897 = EUR 1 in February 2021 and by 22.6% against the US dollar to NOK 8.5092 = USD 1.

Seasonally-adjusted unemployment was 5% in Q4 2020, down from 5.3% in the previous quarter but still sharply up from 3.9% a year earlier, according to Statistics Norway.

Inflation was 3.3% in February 2021, the highest level since December 2018. Inflation averaged 2% from 2010 to 2020.
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