In Norway, housing prices have increased 7.3 percent in the past year throughout the country. However, the Norwegian economic growth outlook has significantly weakened, while joblessness has increased and wage growth decelerated. House price growth is likely to decelerate a bit in the future.
Subdued wage growth and rise in unemployment usually leads to reduced growth in house price. On the contrary, lower interest rates boost house prices. Regional factors impacting the housing market in certain counties are partially responsible for increasing house prices despite the subdued economic scenario, noted DNB in a research report.
The western part of Norway has witnessed a rise in unemployment and a slowdown in population growth; however, house prices in these counties are increasing gradually. Akershus and Oslo have high housing inflation. Unemployment in these regions has declined in the past year.
Moreover, growth in population has been high for long time, while construction of homes has not rebounded accordingly. Both the counties represent a major share of Norway’s housing market and hence lift growth in housing price in the country as a whole, added DNB.
Akershus and Oslo are expected to continue lifting the prices as it will take time before the supply of homes is sufficiently increased to balance demand. However, going forward, additional rise in unemployment and subdued wage growth might impact house prices growth, according to DNB.
