By 2025, economists believe home prices could rise again.
After several years of a violent growth in the housing market, the price trend has reversed somewhat this fall in the first half of 2023.
Historically there is shed Interest rates are driving strong house price growth, but there is little empirical evidence to what extent High Interest rates affect price growth over time.
Luxury home sales are booming
– We expect strong house price growth in 2025, and even with continued high interest rates the housing market will already turn around next spring, senior economist Sarah Mitgard says after a lecture at a housing conference in Oslo. Sponsored by Finance Norge and Iondom Norge.
In September, home prices fell 1.9 percent, the second weakest September in home price statistics history.
Expect a regression in 2025
Mitgard points out that we are now entering a new normal with higher interest rates over time, and less empirical evidence in such a scenario makes it harder for economists to predict.
– We have one more theory Tightening interest ratesTightening interest ratesHigher interest rates should contribute to holding less money for consumption Over time, it will have a smaller negative effect on house prices than the positive effect on house prices that we saw after the financial crisis Expansionary monetary policyExpansionary monetary policyA monetary policy with low interest rates means people have more money left over.she says.
At the previous rate meeting, Norges Bank said it would “probably” raise the key interest rate once more, most likely in December. The forecasts also call for keeping the interest rate at 4.50 until next year.
2023 is leading sales of new homes and home construction so far. Nationally, new home sales fell 38 percent in September, according to figures presented by home manufacturers in October.
This development means many economists believe housing prices will turn around.
– We believe there will be a rebound in 2025, housing prices will rise again, driven especially by the Oslo market, Midgaard told the housing conference.
I expect flat growth next year
– Because the housing market has been very high for a long time, it is less sensitive to interest rates than we expected, says Marte Herge Ström, macroeconomist at Prognoscenteret to E24.
“We expect the same growth as we have seen in the last two months with a further negative trend in the housing market,” he says.
Next year, the forecast center expects relatively flat house price growth.
– There may be some positive developments in the spring, which is usually the case. But we think we will end the year with roughly zero growth due to continued high interest rates, he says.
Low start-ups mean the supply side will remain weak through the end of next year and into 2015, he says.
– We think prices will rebound later, but will still be dampened by higher interest rates, says Strom.
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