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Big cities, and especially Oslo, are helping raise Eiendom Norge’s forecast for the housing market next year.
The trade association estimates an increase of 7.5 percent, only slightly below the annual growth of 7.8 percent in early December this year.
Last week, DNB Markets estimated home price growth of 8 percent next year.
The crown pandemic and Norges Bank’s decision to set the key policy rate to a record low of zero percent knocked all forecasters off the bat for 2020, states Henning Lauridsen, CEO of Eiendom Norge.
Brennhett Housing Market
– No one has met their forecasts for the housing market in 2020, which is because Norges Bank’s zero interest rate decision on May 7 was impossible to predict. The same applies to the measures against the corona pandemic that first gave a sharp drop in billing and prices in March and April, and then with the zero interest rate that gave a broad and strong increase in prices of the housing and activity across the country, Lauridsen sums up in an Eiendom Norge press release.
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Rented
This special exceptional situation will continue in 2021, according to the forecasts of the trade association.
Wild growth in the rental market this Christmas
– The interest rate has been the central driver in the housing market in 2020 and will also be in 2021. Other drivers in the housing market through housing construction, population growth and regulation of loans are neutral. Combining low interest rates and particularly low house construction in Oslo mean that we expect a sharp rise in house prices here next year. Rising domestic consumption and distorting consumption will also likely contribute to higher house prices, Lauridsen says.
A possible prior interest rate hike by Norges Bank is an element of uncertainty for the estimates, he emphasizes.
– In our opinion, Norges Bank should consider raising interest rates sooner. Too strong a trend in house prices is not healthy for the economy, says Lauridsen.
First interest rate increase
Norges Bank’s interest rate trajectory to December 2020 indicates the first interest rate hike in the first half of 2022. Statistics Norway, for its part, believes that interest rates will rise 0.50 by mid-2021 .
– It is likely that the key interest rate could be increased by the end of 2021. The question is whether this is enough to slow down the housing market in 2021. We know from experience that it may take some time before interest rate rises interest hit the market, says Lauridsen.
Record low interest rates are fixed
– As it stands now, we expect a record strong increase in house prices in the first half of 2020. During the fall, we believe in a moderate evolution, as is normal in the housing market for the second half, he says.
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Moderate home construction
New home sales slowed during the spring and then recovered. But both new businesses and new homes completed are lower than in previous years.
He sold property to his son for 20 million.
– Weaker new home sales will translate into lower home construction in the coming years. But at the same time, population growth has also slowed, which translates into lower housing needs, Lauridsen says.
But that’s the big picture. Because population growth is not evenly distributed. It presents special challenges.
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– Much of the growth is occurring in central eastern Norway, where housing construction has unfortunately been too low over time. This contributes to higher house prices, says Eiendom manager Norge.
By prognosis
This bias gives the following forecasts for large cities next year:
- Oslo: 9.5 percent increase
- Bergen: 6 percent increase
- Trondheim: 5 percent increase
- Stavanger: 4.5 percent increase
– Fewer new businesses in recent years in Oslo will result in fewer new homes completed in 2021 than in previous years. At the same time, there is a lot of construction activity in old Akershus, and the housing market in Oslo and old Akershus must be seen in context. The combination of low interest rates and low construction results in even higher house prices in Oslo, says Lauridsen.
