Norway’s home prices gain for fourth straight month

NORWAY’S adjusted home prices gained for a fourth month in a row, exceeding the central bank’s projections and likely reducing expectations of an interest rate cut before March.

Prices grew a seasonally-adjusted 0.4 per cent in November, adding to a streak of gains every month this year bar July, according to data published by Real Estate Norway on Wednesday (Dec 4). Norges Bank had projected a gain of 0.2 per cent.

Helped mainly by a shortage of supply, the Norwegian housing market largely defied the deeper post-pandemic declines seen among its Scandinavian neighbours, reaching new peaks since the spring.

A decision by the Finance Ministry to reduce mortgage loan equity requirements to 10 per cent from 15 per cent, announced earlier on Wednesday, is set to fuel the pace of gains.

Nordea Bank’s Anders Granstad, responsible for the housing market in Norway, said he expects loan demand to increase markedly from January, when the changed lending regulation comes into force and more homes come to market.

The house price increase is the latest in string of factors, such as a bigger budget stimulus for this year, that suggest lower odds of a reduction in borrowing costs before March. That’s the most likely scenario based on Norges Bank’s latest interest rate projections. Still, some forecasters, such as Danske Bank, see a chance of a cut in January or even December, given lower inflation risks.

SEE ALSO

Norway eases loan-to-value mortgage limit to 90%

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Traders in overnight swaps now price in a 41 per cent chance of a reduction in January, with more than a full quarter-point cut priced in for March. BLOOMBERG