Strong sudden rise in house prices in August

Strong sudden rise in house prices in August

There is a lot to suggest we shouldn’t get such a strong price increase, says Prognosesenteret’s chief economist, Nejra Macic, about the latest house price figures.

Eiendom Norge’s nationwide statistics of house price developments in August showed that house prices rose by a whopping 1.9 percent last month. Adjusted for seasonal changes, prices rose 0.6 percent.

– There is a sudden increase in prices in August. Because it comes after what are now five rate hikes, meanwhile the supply side recovered a bit in August. In addition to this, the high electricity prices and the general rise in prices are eating away at people’s wallets.

In August, the Bank of Norway announced a double interest rate hike of 50 basis points in an attempt to beat record highs and accelerating inflation. However, this does not appear to have had an impact on housing price developments – not yet.

The interest rate hike was not moderate

Increasing interest rates from the Central Bank makes it more expensive for banks to borrow from the Bank of Norway, so the increased policy rate also has an impact on the type of mortgage interest that banks can offer to their customers. Last week, DN was able to write about what top brokers referred to as a “change of pace” in the housing market, with the shift from a seller’s market to a buyer’s market.

Still, Monday’s numbers testify to the housing market’s continued strength, and Macic points to one major reason:

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The supply side is still narrow. So there isn’t much to choose from, which I think is the main explanation for why there is such a strong price trend despite higher interest rates and an otherwise high price level.

Because despite the fact that the supply side rebounded sharply in August, it still lags behind the year as a whole. In August, 12,780 homes were offered for sale, up 9.1 percent from the same month last year.

But for the year so far, there are still 5.6 percent fewer homes on the market than in 2021.

– I think it has to do with the fact that there is pent-up purchasing power and a willingness to buy in the market. 2022 has so far been marked by a decline in supply, but that is starting to ebb now. But then there will probably be many people who have been waiting for things to appear on the market, says DNB’s chief economist, Kjersti Haugland, about the strong price increase.

- DNB chief economist Kjersti Haugland tells DN there is likely to be more buyer market after the fall.

– DNB chief economist Kjersti Haugland tells DN there is likely to be more buyer market after the fall. (Photo: Fredrik Solstad)

anticipate cooling

Meanwhile, Haugland says the DNB expects home prices to fall 0.2 percent adjusted for seasonal changes, month by month during the fall and winter.

– I believe that housing price growth will slow throughout the year with the strong rise in interest rates currently taking place. Reach home buyers with a time delay. It takes several weeks before interest rate increases appear as an online bank bill. But she says this effect will likely combine with very high inflation, which attracts purchasing power.

Sarah Midtgaard, chief economist at Handelsbanken, notes that the market is currently priced at a policy rate of 3.25 per cent at the end of the year, and a further increase to 3.5 per cent in the first half of 2023.

And if the market is doing well, Midtgaard believes that strong home price growth could quickly become a thing of the past.

If the market is right, that means mortgage interest rates could rise to five percent by next summer. If lending rates go up significantly, the housing market will likely also get a real cold shower in the future, she says in an email to DN.

The new chief economist at Handelsbanken is Sarah Midtgaard.

The new chief economist at Handelsbanken is Sarah Midtgaard. (Photo: Per Thrana)

Macic in the forecast center also expects a decline in home prices for the rest of the year, both in nominal and seasonally adjusted prices.

– I think maybe the strong growth in August means you’ve built more upside. There is room for a little She adds that the decline in home prices is now greater than they would have been without this big price increase in August, but she also adds:

– However, our expectations are not so bleak. We don’t think we will see a price crash in the housing market, but the market will pull back a bit after a period of very strong growth.

They are already noticing that the price hike and increased interest are eroding people’s wallets, says Randy Marjama, head of private market at Nordea.

We are already seeing a significant increase in the number of mortgage customers who are applying for interest-free payments, or who would like information about fixed interest rates. More are reaching out for advice on steps they can take in their finances to deal with increased electricity and food expenditures and increased interest rates, says Marjama.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using the links that lead directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For more conditions see here.

Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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