Norway is the latest country to have reported a dramatic increase in property prices.
The rises, which are especially prominent in the capital of Oslo, are a result of the recent interest rate cuts that were introduced by Norges Bank.
According to Statistics Norway, there was just over a 10% rise in the country’s house price index during 2016, which was the biggest rise since Q1 2010. When adjusted for inflation, prices had increased by 6.32% over the same period.
However prices in Oslo have shot up by just under 22% year-on-year (17.48% inflation-adjusted) during the year to Q4 2016. During the last quarter of last year, property prices in the capital also rose by 2.53% (2.08% inflation-adjusted) from the previous quarter.
Statistics Norway also revealed that the average price of dwellings sold at the end of last year was NOK 3.5 million (around £325,000. The company attributed the growth in housing demand to low interest rates, high population growth and several years of strong income growth.
The statistics bureau is expecting property prices to rise in 2017, “but less than last year given the growing number of homes on the market”.
Meanwhile, nominal house prices are expected to decline slightly over the next few years, due to the introduction of tighter credit rules.
In the short term it is believed that prices will begin to flatten out due to a good supply/demand balance.
Christian Dreyer, CEO of Real Estate Norway, explained:
“In the short term, the measures will have quite a small effect. Those who will buy housing in the first months will do it on the basis of financing approval that they have received from banks before Christmas. The banks will probably stand by them. Eventually though, these tighter requirements will take effect but just how big their impact will be is uncertain.”