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The leader of one of Norway’s largest home developers is not at all recognized in the accusations politicians have made against the industry.
The acting urban development agency Arild Hermstad (MDG) in Oslo is one of those that has made tough accusations against Norwegian property developers.
Hermstad believes that developers are too concerned about managing the market, they do not care about the construction of social housing and lack the concepts for it, and that it is the wrong medicine that only more housing should be built.
Rolf Thorsen, CEO of Selvaag Bolig, does not recognize himself in the allegations. To start with the claim of lack of social responsibility:
– Incorrect, we are in a comprehensive process with the planning and construction agency to build smaller housing units. The market wants it, 47 percent of Oslo households are individual households. But the apartment rule (see data box below, editor’s note) prevents us from building more small apartments, Thorsen tells Nettavisen Økonomi.
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Not in the grip
– That a large part of what we build should be 4 bedroom apartments is out of the question. People can’t afford these apartments, they don’t want them, he thundered.
This is not a general softening of the norm, but a greater pragmatism.
– We have a good discussion with the planning authorities about more flexibility, so it is incorrect to say that the industry does not work with that. So you underestimate the industry when it comes to what is good for business.
– We want to build what people want, but now the department rule leads us in the direction of building too many large departments.
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It’s not our job
– According to Hermstad, do you have enough muscle for more social housing?
– But social housing is not our job, it is a public task. That said, a good chunk of social housing construction is set by the market itself by building smaller units to attract first-time buyers.
– Smaller units have a much lower entry price and by helping people it has a social effect. It is quite obvious. Olav Selvaag revolutionized the housing industry right after the war when there was a huge housing shortage. Their concepts meant that we could build much earlier and faster, it had a great social effect, but it was not social housing.
Hanna Marcussen (MDG) and AUF leader Ina Libak have alleged, among others, that homebuilders leave vacant lots in hopes of a price hike. Thorsen dismisses that.
Absolutely not
– I can’t speak for the entire industry, but Selvaag Bolig certainly doesn’t. Our task is to sell as many houses as we can. Believing otherwise lies in your own irrationality. Then we would have undermined our own business model and I promise in good faith that we will not.
Hermstad has also stated that it is not the lack of zoning plans that is the problem in the Oslo property market. We only have market management that applies to housing policy, and that makes entering the market very expensive.
– That there must be a lack of plans, I cannot counteract. But I’m absolutely sure there are very few regulated parcels in Oslo, says Thorsen on why Oslo prices are so high.
Too long
– Part of the problem is that in Oslo it takes too long to decide on projects. We measure the average processing time from the kickoff meeting until we can start building. It takes four to five years, while the standard time is one year. The result is very few regulated parcels.
Thorsen believes that many in the industry can recognize themselves in the fact that in many cases it takes ten years from the beginning of planning to completion of the homes.
But in a new report by Boligprodusentene and Prognosesenteret, the annual demand for homes in Oslo has dropped from 5,000 to just under 3,500 in the future, which may ease pressure on prices in the capital, but Thorsen does not accept the forecast. .
– Here we must be very careful with the use of the word “forecast”. It is not at all, it is a projection of the line that has been there. A projection-based needs analysis is something completely different from need. According to the Forecasting Center, the annual need is 4,500 new homes, not 3,000 homes.
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Less than half
– But even with 3,000 new homes a year, yes, last year it was delivered. But this year 2,000 new homes will be built, next year less than 2,000 and in 2022 even less. When less than half of what is needed is built, house prices go up. There must be a balance between supply and demand. Believing that the market is not working is wrong.
He notes that Oslo’s population growth in 2019 was just over 12,000. Construction began last year on 1,900 homes that had been sold in advance. In the first half of the year, the number is only 399 households, so the effect is increasing.
– Are there areas in Oslo now where costs don’t justify major development?
– In much of Groruddalen, there is not enough demand and prices are high enough. I also think that for Gjersrud Stensrud, you have to invest in something that gets people to come and go from there. They can’t just get into a car in city queues, rail transportation is the best.
– Do you believe in greater housing growth in neighboring municipalities in the future?
– Yes, we already see that. There is a lot of pressure on the markets around Oslo, because Oslo doesn’t do its part of the work. But this is not how all other municipalities are good. In Bærum, new housing has not been high on the agenda, this is what they have done in Ullensaker and Lørenskog.
But it is expensive to build new apartments in central areas. Selvaag Bolig and OBOS are struggling to reach less than 40,000-43,000 crowns per square meter in pure construction costs. Thorsen says that those within Ring 3 now pay more than NOK 30,000 per square meter in parcel costs.
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Social effect
This means that the construction and plot costs for a 75 square meter 3-room apartment are around NOK 5.5 million. Additionally, there are capital and engineering costs, as well as profit requirements.
– Again, the main problem is that it is very little regulated. And I do not recognize in the photo that we are not interested in helping. I find that a lot of what we do has a great and good social effect, but social customers are not our job, says Thorsen.
Also remember what the public sector imposes on them in terms of infrastructure costs, such as the construction of parks and new roads.
– The municipality of Oslo itself is quite crude here, and we are now appealing a case to the Supreme Court in Mortensrud south of Oslo, where such costs are imposed on us. It is the clients who pay in the end, although it can squeeze our margins and also affect the prices of the plots and the sales prices, says Thorsen.
Incorrect
The Oslo City Council often points out that a reserve of around 25,000 homes is already waiting to be built. They reject the lack of plots, there are many projects to tackle.
– How real is this reservation?
– I have heard this many times before- From Selvaag Bolig, this is not entirely true, that there are many plots ready to build. Politicians can not only dismiss such a claim, they must come to fruition, says Thorsen.
Oslo’s largest housing stock is the Gjersrud Stensrud area in the far southeast, with 10,000-15,000 households. But Thorsen says the area is not ready for development. You can never imagine that there will be any development here in the 2020s.
– The municipality of Oslo is also the largest landowner there is, so it is only up to the municipality to start.
Without alternatives
AUF has introduced a home tax increase to curb market pressure. The manager of OBOS, Daniel Kjørberg Siraj, dismissed as an effective means, and so does the manager of Selvaag Housing.
– This is a very large and complex issue. My main reflection is that one sees housing as just an investment and an alternative to putting money in Norwegian stocks and businesses.
– But the choice is not between buying a house or giving a lot of capital to the business community. Yes, some speculate, but I think the house tax increase will have a marginal effect – that’s not where the shoe hits, says Thorsen.
Limited volume
Hermstad and others have also advocated for a third sector of non-commercial housing. Thorsen believes it can go up to a certain point, but not to a great extent and in large volumes.
– In the current situation, we need several thousand new houses a year and the public sector does not have the money for that. But I’m not so dogmatic that the big players couldn’t have accomplished much by cooperating with the public sector, he says.
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