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In October 2023, the decline in housing prices observed in September persisted with a nominal decrease of 1 percent. Adjusted for seasonal variations, housing prices nevertheless showed a slight increase of 0.2 percent. Even in the face of changing price trends and interest rate hikes from Norges Bank, the Norwegian housing market maintained high levels of activity throughout October.
- House prices fell by 1 percent in October, which is a weak development, although the seasonal adjustment is slightly positive. The seasonal adjustment has been significantly affected in September and October by the weak development in the autumn of 2022. Therefore, the seasonally adjusted figure should be given less weight, says managing director Henning Lauridsen of Eiendom Norge.
Lauridsen explained that the price trends in the previous year were particularly unique, with strict lending regulations leading to a significant price drop in the fall, followed by substantial increases in the spring after easing measures were introduced at the turn of the year. As a result, last year exhibited an unusual seasonal pattern.
Eiendomsverdi, the company responsible for housing price statistics, typically utilizes an algorithm to calculate seasonal patterns. This algorithm considers price changes over the last ten years, with greater weight assigned to recent changes. Due to the unusually large price fluctuations in 2022, the already published and upcoming seasonally adjusted figures for this winter and the next year may be somewhat misleading. Henning Lauridsen pointed out that seasonally adjusted figures could be overly positive in the fall and overly negative in the spring.
Eiendomsverdi conducted an alternative calculation of seasonally adjusted prices, using the last ten years before the pandemic as a basis instead of ongoing data up to the present day. The alternative calculation suggests that when considering the period from January 2010 to December 2019 for seasonal adjustments, prices have fallen by a total of 1.8 percent over the last three months. This is approximately 1.1 percentage points lower than what the official seasonally adjusted price changes indicate.
Eiendom Norge asserts that the alternative calculation provides the best basis for seasonal price adjustments. Harald Magnus Andreassen, Chief Economist at Sparebank1 Markets, suggests that the alternative offers a more robust foundation for explaining the current state of the housing market this fall.
From the beginning of the year until May, Norwegian housing prices consistently rose each month, reaching a peak of 7.7 percent and making history as the highest point to date. However, after a few sluggish months since summer, the trajectory of housing prices has adjusted. Up until October, housing prices have increased by 2.6 percent this year. At the close of October, the average cost of a home in Norway was 4.37 million kroner, down from 4.6 million kroner in September.
Despite the shifts in price trends over the last three months, activity in the secondary market remains stable, indicating the continued functionality of the used housing market:
- In October, 7,762 homes were sold in Norway, marking a 2.7 percent decrease compared to the same month in 2022.
- So far in 2023, 81,031 homes have been sold in Norway, representing a 0.1 percent decrease compared to the corresponding period in 2022.
- In October, 9,333 homes were listed for sale in Norway, indicating a 10.7 percent decrease compared to the same month in 2022.
- So far this year, 94,260 homes have been listed for sale in Norway, reflecting a 2.3 percent increase compared to the same period in 2022.
In October, the average time to sell a home increased to 41 days from 40 days in September. Oslo boasted the shortest selling time, while Tromsø had the longest at 56 days. Following October this year, there are 19,944 unsold used homes in the housing market, marking the highest number recorded in the history of housing price statistics dating back to January 2009.
The significant number of unsold used homes has garnered attention in the past month. Lauridsen highlights the current substantial supply of homes but notes that the number of new homes entering the market is decreasing due to high sales volume, aligning with 2022 levels. Eiendom Norge anticipates a decline in the number of unsold homes in the coming months.
In October, housing prices decreased in all major cities in Norway. Tønsberg m/Færder experienced the strongest seasonally adjusted price development in October, with prices rising by 1 percent. Asker and Bærum, Kristiansand, and Stavanger m/omegn had the weakest seasonally adjusted price development, with a decline of 0.8 percent.
So far this year, Kristiansand and Stavanger with surrounding areas have seen the strongest development with increases of 6.7 and 6.4 percent. Tromsø and Bodø m/Fauske have experienced the weakest development so far this year, with a decrease of 0.8 percent. In 2023, housing prices in Oslo and Bergen have increased by 2.9 and 2.8 percent, respectively, while the price development in Trondheim is 0.9 percent.
Eiendom Norge's CEO notes that the outlook for housing price development in Norway appears grim, except for Stavanger and Kristiansand.
- House price trends in Stavanger and Kristiansand this year differ from the rest of the country, and we expect that these cities will also stand out when 2023 is over. Many years of weak to moderate development here provide the basis for a stronger housing market now, says Lauridsen.
In the last two months of the year, Eiendom Norge anticipates a weak development in housing prices.
- As it stands at the moment, the nominal housing price development in 2023 is expected to hover around zero, says Lauridsen.
Senior economist Sara Midtgaard at Handelsbanken Capital Markets also predicts that the correction will persist. She argues that a more moderate nominal fall in October increases the downside risk towards November, pointing to the record-high number of unsold homes on the market and forecasts of lower demand for new home loans in the coming months.
Along the same lines, analyst Marte Herje Strømme at Prognosesenteret believes that the trend will continue, and a decline in the nominal price will persist.
- Interest rates will have a further impact, and the September rate hike will affect households now. If another increase occurs in December, I believe prices will weaken further.
So far in 2023, Norges Bank has raised the policy rate five times to curb inflation. In the previous interest rate decision, Norges Bank decided to keep the policy rate unchanged at 4.25 percent. However, they signal that the policy rate is likely to be raised in December, based on the price outlook they assessed. Central Bank Governor Ida Wolden Bache shares that if they gain increased confidence that underlying price growth is declining, it could lead to interest rates being kept steady.
Sources: Eiendom Norge, DN, Norges Bank, NRK
