Norway home prices stay put, beating central bank forecast

PRICES of Norwegian homes were little changed last month, adding to signs that the housing market is more resilient to high inflation and rising credit costs than the central bank expected.

Prices moved sideways in January from the month before, on a seasonally-adjusted basis, after a 0.2 per cent increase in December, according to data from Real Estate Norway on Friday (Feb 3). The central bank had expected a 0.5 per cent decline last month, adjusted for seasonality. 

“Overall a stronger housing market than what Norges Bank projected – given the December surprise increase – but we still believe in prices cooling in the coming quarters and so does Norges Bank,” Kristoffer Kjaer Lomholt, head of FX research at Danske Bank, said.

The data, along with stronger-than-expected labour market figures earlier on Friday, is likely to cement expectations of a quarter-point interest rate hike by Norges Bank next month. It may also fuel bets that the tightening campaign will need to be extended more than currently projected in the central bank’s rate path.

It also clearly contrasts with developments in the housing markets of neighbouring Sweden and Denmark, where home prices are undergoing double-digit declines following pandemic-era gains.

“After a year with many interest rate increases, 2023 has started with surprisingly good activity in the housing market,” Randi Marjamaa, head of personal banking for Nordea Bank Abp in Norway, said by e-mail. “This is probably driven to a large extent by the fact that the interest rate peak is approaching, and that many people see good opportunities after the fall in prices in the autumn.” Still, she said the bank expects a “slight” decline in house prices during the spring. BLOOMBERG

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