The new housing market has long been characterized by low activity, both in terms of sales and initiation of new properties. This trend continued through October 2023, and twelve-month sales are now below the financial crisis level, according to a press release from Boligprodusentenes Forening. The challenging situation in the new housing market reinforces the already significant housing shortage and puts further pressure on housing availability.

The weakest new home sales 

Since 1999, Boligprodusentenes Forening has not registered a lower level of twelve-month sales.

-             In October 2023, the twelve-month sales are lower than the bottom point during the financial crisis, says the CEO of Boligprodutenenes Forening, Lars Jacob Hiim.

In the last twelve months, the sale of new homes has experienced a significant decline. The total number of new homes sold in the last twelve months is 13,613 housing units, a drop of 38 percent compared to the previous twelve-month period. The sales per housing type show that detached houses have 26 percent lower sales, while semi-detached houses and apartments have 17 percent and 49 percent lower sales compared to the previous twelve-month period.

So far this year, 10,529 new homes have been sold, which is 35 percent compared to the same period in 2022. Sales of single-family houses and semi-detached houses have decreased by 24 percent and 18 percent, respectively, compared to the same period in 2022. For apartments, the situation is even more significant, with a decrease of 45 percent.

Compared to October 2022, the sales in October 2023 were 28 percent lower. In the last three months (August, September, and October), 2969 new homes have been sold, a decrease of 29 percent compared to the same period in 2022. During this period, 907 detached houses, 658 semi-detached houses, and 1404 apartments were sold, a drop of 13 percent respectively, 6 percent, and 43 percent compared to the same period in 2022.

Low initiation of new housing

The commencement of new housing also shows a persistent downward trend. The commencement of new housing in October 2023 is 12 percent below the level from October 2022. During the last three months, 3 652 new homes have been commenced, which is 42% lower compared to the same period in 2022. The commencement per housing type in this period shows that detached houses are 12 percent below, detached houses 3 percent below, and apartments a whopping 61 percent below the corresponding period in 2022.

So far this year, the number of new housing commenced has been 10181 housing units, a decrease of 42 percent compared to the same period in 2022. The commencement per housing type this year shows that the number of single-family homes started is 19 percent lower, semi-detached houses are 30 percent lower, and apartments are 55 percent lower compared to the same period in 2022.

The total number of new housing commenced in the last twelve months is 15,827 housing units, 38 percent below the previous twelve-month period. The commencement per housing type shows that detached houses are 19 percent lower, while detached houses and apartments have respectively 22 percent and 50 percent lower starts compared to the previous twelve-month period.

The long-term challenge for the new housing market

Boligprodusentenes Forening predicts that the market for the sale and commencement of new housing will, unfortunately, fall further since another interest rate hike was announced in December. 

-             The crisis in the new housing market affects everyone in need of housing. The shortfall is significant, and it will take time to reverse the trend and bring housing production up to a level that meets the housing need, says Hiim.

Along the same lines, Sara Midtgaard, senior economist at Handelsbanken, believes that there are no signs that activity will pick up.

-             This could cause problems for many years to come, well into 2026 and 2027.

Midtgaard predicts that as early as next year, the low number of new homes could lead to challenges with supply in the housing market. This is in contrast to the current situation, where there are currently many homes available for sale. She believes that the uncertainty surrounding how long the interest rate will remain in Norway affects the market for new homes.

- I think many people are still sitting on the fence, and would rather buy a second-hand home instead of an expensive new home, she says.

Midtgaard points out that developers "face headwinds from all possible sides", including rising construction costs, significant labor costs, and challenges in implementing construction projects when there is limited demand for housing.

Weak market for new holiday homes

There is also a persistent downward trend in the market for new holiday homes:

Sales of new holiday homes so far this year have experienced a drop of 47 percent compared to the same period in 2022. During the last twelve months, 1,963 units were sold, which is 47 percent lower than the previous twelve-month period.

So far this year, the start of new holiday homes is 40 percent below the corresponding period in 2022. From October 2022 to October 2023, 3,412 units were commenced, a decrease of 33 percent compared to the previous twelve-month period.

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Sources: Boligprodusentenes Forening, E24