Norway home prices to avoid decline this year, central bank says

NORWAY’S housing prices will probably keep growing this year instead of the previous forecast of a contraction, the country’s central bank said, adding to evidence of a sharp contrast with its Scandinavian peers.

Home prices in the fossil-fuel-rich Nordic nation will gain 0.3 per cent this year, compared with the March projection of a 2.9 per cent decline, Norges Bank said in its new monetary policy report published on Thursday (Jun 22). While it still expects prices to edge down in the second half of the year, residential property valuations will be almost 18 per cent higher at the end of the year than pre-pandemic levels, the bank said.

The new estimate follows data showing Norwegian home prices remained near record levels in May, defying the central bank’s projections of a decline and setting the country apart from neighbours Sweden and Denmark, where prices are now trailing last year’s peaks by about 13 per cent and 6 per cent, respectively. 

Home prices in Norway last had a nominal decline in 2008, while its households have some of the highest debt ratios to disposable income globally, at about 240 per cent at the end of last year.

Still, the picture in the housing market isn’t all good. Lower-than-expected housing starts and weaker new home sales will drive housing investment into a bigger fall than the central bank expected earlier, in turn adding to factors that speak for slower interest rate hikes, Norges Bank said. BLOOMBERG