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House prices in Oslo over the next two years can rise as much as home buyers can only have nightmares.
KVADRATUREN (Nettavisen Økonomi): On Monday morning, the latest Nurse Index will be released to Eiendom Norge (see data box below). We’ll get back to it, but for nurses and others with completely normal jobs and incomes, it will be difficult to make headway in the Oslo property market.
Last year, house prices in Norway increased 4.3% nationally and 6.1% in Oslo.
– I think we will end up with a price increase for the country this year of 4-5 percent and up to 7 percent in Oslo, says CEO Grethe W. Meier at PrivatMegleren to Nettavisen Økonomi.
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Very scared
– Next year, I think we will have double digit growth in Oslo, and I am even more afraid of 2022. I am very afraid of 2021 and 2022. If we do not take any urgent action now, this will only intensify and continue. There are many who have a lot of money in Norway, Meier emphasizes.
– With your predictions, can we get a total house price growth of 25-30 percent in Oslo for the years 2020-2022?
– Yes, unfortunately, because there are very few new buildings entering the market.
– Young people going to the Oslo market don’t really have a chance without help?
Yes, I would actually say that, unless we do something with the mortgage regulations and reserve a separate quota for those who have service capacity, but no equity. Those who don’t have equity or parental help have no chance to get in, Meier cautions.
Also read: Finanstilsynet wants to change mortgage regulations
Not surprised
It is supported by the former director of Selvaag Bolig, Baard Schumann. He now runs the newly created Nordr Eiendom, formerly Veidekke Eiendom. When Nettavisen confronts Schumann with Meier’s predictions, he responds:
– Yes, I agree with her and I won’t be surprised if prices in Oslo go up 7 percent this year. September is normally a strong month in the market, and then it can be a peak year. I don’t see any reason why the next few years should be at least as strong.
– Three years with 7 percent gives 21 percent in total, and we can quickly reach 25 percent. It is difficult to say whether the increase will be 20 or 27 percent. What can happen is an increase in the interest rate, but the increase can be as great if the interest rate is not too high. Very little starts in Oslo, so politicians have to let it go, says an ironic Schumann.
They do not want to
– Don’t home builders have a vested interest in warning against a sharp rise in prices?
– No, it’s not good, we don’t want it at all. Whenever there are such increases, there are public sector restrictions, then the market stops. We don’t like it, but we want a normal price increase of around 3-4 percent.
An average house in Oslo now costs around 5.5 million crowns, according to figures from Eiendom Norge. They correspond to ten times the average wage income in Norway. If this home were to increase 20 percent in value, we’re talking 6.6 million by the end of 2022.
There have been several allegations that home builders in Oslo leave vacant plots to speculate on a price increase. Schumann’s successor at Selvaag Bolig, Rolf Thorsen, dismissed this as nonsense. The predecessor agrees.
– Politicians who say that show how little they understand finance. A home builder who buys land for $ 100 million should have a return of 15 percent, or $ 15 million a year.
I do not understand
– Then the parcel must increase each year by 15 percent in value, and it is not possible.
– Does the City Council think there are more than enough plots ready to build in Oslo?
– But it does not make sense to regulate 1000 homes in one area. It is not possible to develop such an area in two years, it takes ten years. The Oslo City Council hides behind the housing stock, most recently through the Filipstad regulation.
Schumann points to Kristiansand as a good example of the opposite. For a long time there has been a large supply of homes. House prices in Kristiansand have risen 21% in the last ten years, in Oslo a staggering 103%. The difference between Oslo and the rest of the country is increasing, it must stop sooner or later.
– It is difficult to say how much will flow into neighboring areas. But people are busy using their time and living in smaller apartments, says Schumann.
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Family banks
The seasoned home manager also cares about what he calls the family bank, young people who get help from wealthy parents to enter the housing market.
– This family bank is strong and the differences are increasing. There are many who have money in hand, because it is possible that the father and the mother have paid for the house and the cabin. And despite how little money costs now, the family bank becomes wrong and unfair.
But going back to our nurses, when Nettavisen asks Meier if there won’t be a single one of them who can afford to shop in Oslo in the future, she responds:
– You are absolutely right, there are no nurses in the center of Oslo, unfortunately, is the answer.
– Is there anything to suggest that inflation in Oslo will slow down?
– No, not what I can see, unless there are some restrictions on funding, like the deviation fee in Oslo in the mortgage regulations is reduced again to 8 percent.
Too early
– Do you think it is correct to re-toughen mortgage regulations?
– I absolutely understand that you have to consider it, but I think it is actually too early. First we must see a little more of the effects of the crown and unemployment. I have experience that banks say they have spent much of the fee on those who need a grace period, not, for example, first-time founders without capital.
– If that’s what the fee is going to now, I think banks should be able to evaluate this, because they are the ones who can evaluate their trade. At the same time, banks say they have not exceeded that much 10 percent in the flexibility fee, Meier says.
– Do you see any signs that the housing market has slowed down a bit in the last month?
– Prices have become more normalized. There were extreme volumes in May, June and July, the turnover has been very high. There have been many who wanted to change homes, and that has helped prices rise a bit artificially.
Live by volume
But are brokers always accused of having a keen interest in predicting house prices?
– We do not benefit from the market being like a yo-yo, up and down. The real estate industry lives by volume and not by price developments. We live much better with the fact that there is predictability for home buyers and sellers, because then there is a balanced market, Meier responds.
– A market that goes up and down a lot will also have very large volume variations. For us, it is not very appropriate that there is a high price evolution, then there will always be a reaction, he continues.
Meier does not believe that we will return to the conditions of 2016 and 2017, because we have the mortgage regulations. Among other things, the regulations regulate a maximum of five times the income on loans and were introduced in January 2017 after the wild real estate year 2016. The following year, prices fell.
East of Oslo
– Do you have any advice for those who are going to buy in Oslo, areas that seem favorable?
– It has a lower price as soon as you reach areas like Tøyen and Old Oslo. These are areas that runners say are becoming more fashionable, where there is a bit more “hipsters” and the opposite of St. Hanshaugen and Oslo West.
– Those areas expect at least the brokers to go higher in price, and these areas are a bit lower now, Meier says.
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