The industry organization says the shortage of completed homes will create a housing crisis within a few years. This could lead to strong growth in housing prices in 2025 and 2026.
– This is a construction crisis, not a housing market crisis.
This is what Eiendom Norge CEO Henning Lauridsen says.
On Wednesday, housing price forecasts for next year were presented. Eiendom Norge expects house prices to grow by four percent in 2024.
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At the same time, the director fears that there will be a housing shortage within a few years. He believes that the crisis in the construction industry will lead to very few new homes in 2024 and 2025, creating a compressed market.
“We believe this will lead to strong growth in house prices in 2025 and 2026,” says Laurisen.
Housing crisis in a few years
At the end of November, construction of only 11,000 homes had begun in Norway in 2023, according to housing manufacturers.
This is the lowest start of new home construction since the banking crisis of the late 1980s, according to Eiendom Norge.
– This means that we will have a decline in housing construction in the coming years and a crisis for the construction industry, says Laurisen.
It is believed that we will only see the consequences of this from 2025, when a sharp decline in the number of completed homes is expected.
It may lead to lower interest rates
Lauridsen goes on to say that whatever the decline in housing investment ends up being, lower housing construction and strong price growth will mean a strong setback for the Norwegian economy with weak GDP development and high unemployment.
– If this scenario materializes, we believe that Norges Bank will have to cut the interest rate faster than they expect from December 2023, he says.
The interest rate was raised sharply during the year, from 2.75 percent to 4.50 percent. This is much more than the interest rate path indicated at the beginning of 2023.
– At present, Norges Bank gives more weight to the inflation target and the krone exchange rate than to considering the economic situation, says Lauridsen.
-We believe that Norges Bank will at some point have to focus more on the weak prospects of large parts of the Norwegian economy and especially the construction industry. “We do not think it is unlikely that the first rate cut will occur before the summer and we envision three rate cuts next year,” says Laurisen.
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Tracks very high price growth in Oslo
Eiendom Norge believes house prices will grow in all major cities in 2024, and expects development to be strongest in Oslo and Bergen. This is what the forecast looks like:
- Oslo – 6 percent increase
- Bergen – 3.5 percent increase
- Trondheim – an increase of 2.5 percent
- Stavanger – 7 percent increase
- Tromsø – 1 percent increase
Laurisen points out that housing price growth in Oslo was stronger in 2023 compared to the rest of the country and what was expected at the beginning of the year.
– In 2025, and especially in 2026, price growth could be very high as a result of too few homes being completed, he says.
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