Recent figures have revealed that Norway’s housing market downturn continued in January, with the slowdown being partly attributed to the implementation of stricter mortgage rules.
According to Real Estate Norway, property prices in Scandinavia’s richest economy fell by a seasonally adjusted 0.4% in January from December, and were down 2.2% on an annual basis.
The downturn is being felt most sharply in the capital, Oslo, where house prices fell by 3.01% year-on-year during 2017 – a dramatic contrast with 2016’s rise of 21.68%.
New lending regulations were introduced back in January 2017 in a bid to restrain house prices in Oslo, and the Norwegian government has now asked the Financial Supervisory Authority (FSA) to advise on the impact of those rules, and whether they should be extended past their 30 June expiration date. The FSA is expected to respond before March.
The new rules included a cap on borrowing at less than five times a household’s income, as well as mortgages running over a shorter period of time. In Oslo, second-homebuyers are required to have at least 40% equity financing, compared to 15% for those with only one property.
Year ahead could see further softening
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Flats and apartments are significantly more expensive than houses in Norway. The average price of detached houses at the end of last year was NOK 24,550 (£2,250) per square metre according to Statistics Norway, while the average price of an apartment was NOK 52,755 (£4,840) per square metre.
Sales of all housing types fell by 0.7% to 54,945 in 2017, while sales of new homes plunged 22%.
Real Estate Norway is predicting that house prices will fall by just 1% this year, but Fitch Ratings says that it is expecting prices to fall by as much as 5%.
The Prime Minister Erna Solberg, said: “What we’re seeing now is a normal adjustment of the housing market after years of rising prices. I see no need to alter the regulations.”