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Supply squeeze: Why Norway’s housing market will struggle in the mid-term

With Norway's central bank hinting at a further interest rate hike in December, real estate industry experts are worried the high policy rate will negatively impact new housing projects.

Published: 21 September 2023 16:33 CEST
Oslo building
In recent months, Norwegian media have dedicated a lot of attention to the acute shortage of housing supply in parts of the country, with eastern Norway emerging as the most acute pain point. Photo by Emmanuel Appiah on Unsplash

The decision by Norway’s central bank (Norges Bank) to raise its key interest rate to 4.25 percent on Thursday was a widely expected move, as the institution continues to fight inflation.

However, the announcement that the bank will likely carry out another interest rate hike in December was a big surprise to analysts.

READ MORE: What Norway’s latest interest rate announcement means for you

Aside from the finance world, the announcement also ruffled many feathers in the real estate industry, with prominent industry leaders warning about the potential consequences of the central bank’s approach.

Housing supply to take another hit

In recent months, Norwegian media have dedicated a lot of attention to the shortage of housing supply in parts of the country, with eastern Norway emerging as the most acute pain point.

New home sales in the region have fallen by almost 60 percent in the last two years, according to recent reports, which has led to eastern Norway seeing a suspension of new housing projects in recent months.

The central bank’s surprise announcement of a likely December rate hike made Carl O. Geving, managing director of the Norwegian Association of Estate Agents (Norges Eiendomsmeglerforbund), worried about an escalation of the supply shortage in the country.

In a comment to the newspaper E24, Geving warned that a high policy rate may negatively impact new housing projects.

He predicted a potential drop of 13-14 percent in housing project investments by the end of 2023.

In his opinion, this would also negatively affect the housing supply in the country, exacerbating the already precarious position of many prospective homeowners.

More expensive mortgages

As the central bank raises its key interest rate, commercial banks in Norway usually follow suit by increasing interest rates on mortgages and deposits.

That means that mortgages had become very expensive since 2021, when Norges Bank started increasing its key rate.

The central bank now forecasts that mortgage interest rates might rise to 5.7 percent in 2024 and not start falling until 2025.

At the same time, housing prices in Norway – which have fallen in August – have proven to be more resilient than most industry experts expected earlier on in the year.

Pricier mortgages and expensive homes have led many potential newcomers to Norway’s housing market to reconsider their purchase, holding off the decision to buy.

A supply crisis to manifest once interest rates start going down?

In early September, Geving told The Local that a decreasing supply will lead to problems in the market once interest rates start going down.

“You never know when the central bank will make that move, but let’s say they decide to decrease rates in 2024 and 2025, and wages continue to increase, people build up stronger personal finances, and demand spikes – that’s when you’ll have a problem,” Geving said on September 5th.

While the supply issues are expected to emerge as a problem later down the road, the rate policy signalled by Norges Bank might help push down housing prices in the country even further, contributing to what some economists already expect to be a somewhat tough autumn for the Norwegian economy and housing market.

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PROPERTY

From BBQs to laundry: What you can (and can’t) do on your balcony in Norway

Unlike in townhouse areas in Norway, where disputes may revolve around parking, trees, or hedges, in apartment complexes, the focus often shifts to what is allowed on balconies.

Published: 22 May 2024 11:45 CEST
From BBQs to laundry: What you can (and can't) do on your balcony in Norway

If you’re living in a multi-story family house that you own outright, chances are you’re not losing sleep over how your balcony barbecue might impact your neighbours.

However, if you’re part of a Norwegian housing association or condominium – a popular choice among homeowners in the country – you’re likely living in close quarters with your neighbours.

READ MORE: The key things you need to know about Norwegian housing associations

This proximity can sometimes lead to conflicts, with balcony use emerging as a familiar battleground.

From barbecues to laundry and open fires, there’s no shortage of potential points of contention.

The general rules

There are no laws specifically regulating what you can or can’t do on your balcony.

However, several pieces of regulation regulate what is considered acceptable behaviour in housing associations, as well as safety concerns when it comes to balcony use.

For example, the Housing Association Act (Lov om burettslag) prescribes that you can’t act in a way that would inconvenience others. 

On the other hand, you’ll find that many Norwegian housing associations have their own set of rules regarding what is considered acceptable when it comes to balcony use.

Making changes to the balcony itself

Generally speaking, you can’t make alterations to the balcony – such as, for example, closing it off with glass walls – without considering its impact on the building’s facade.

As the facade isn’t solely yours, you will need to ask the board of your housing association for approval of any, for example, construction interventions.

Furthermore, many housing associations have clearly defined rules concerning balcony aesthetics, which aim to maintain a cohesive building appearance.

If you end up in a disagreement with your housing association, make sure to read The Local’s guide with tips on how to navigate the process.

How can I get more privacy on my balcony without going through housing association approvals?

Plants can often be an effective solution to increasing privacy on balconies when you want to avoid the hassle of submitting an official request for more comprehensive interventions to your housing association’s board.

Large pots filled with plants can offer ample protection, and there’s usually little restriction on having plants on a balcony.

However, keep in mind that having plants, too, should be done within the realm of good taste – your balcony can’t look like a jungle from the outside.

Can I have a barbeque on my balcony?

While there are no general prohibitions on using barbecues in Norway (unless a ban on outdoor fires is in place), Norwegian housing associations often regulate their usage to mitigate risks.

OBOS, Norway’s largest housing association, typically permits electric and gas grills but imposes restrictions on charcoal grills due to safety considerations. Furthermore, many associations limit the number of gas bottles you can keep on your balcony. 

Some associations also designate barbecue areas in communal outdoor spaces.

You’ll usually be able to find the information regarding barbecue rules through your association’s websites, Facebook group, or hallway notices.

Before lighting up your grill, consider factors like wind direction, neighbouring units, and permissible barbecue types.

Can I dry my laundry on my balcony?

Drying laundry on balconies, though seemingly mundane, can also provoke disputes among residents.

There is no blanket rule here. In some housing associations, for example, in parts of Bærum or Oslo, the association bylaws prohibit or restrict drying laundry on balconies, limiting it to specially designated drying rooms.

However, these examples are seemingly the exception rather than the rule – meaning you should be in the clear. 

Pictured is a clothes peg.

You should be fine to dry your laundry on your balcony. Photo by Photikus Production on Unsplash

Can I smoke on my balcony?

Once again, Norwegian housing associations have the authority to establish smoking rules on balconies.

Here, the key consideration is the widespread negative social attitude toward secondhand smoke (you’ll see warnings about secondhand smoke throughout Norwegian cities – for example, many bus stops and awareness video campaigns that run in buses will point to this issue).

So, while smoking in private residences falls outside legal regulations, know that even if the law and your housing association allow it, you might raise an eyebrow or two from a neighbour if you smoke on a balcony that is close to their windows or balcony.

What about satellite dishes?

You should be fine when it comes to installing a satellite dish on your balcony – most housing associations allow it.

Sunbathing 

If you wish to sunbathe on your balcony, with or without clothes, you may be in the clear as long as the housing association has no rules stating otherwise. 

There is no law in Norway which expressly forbids being naked. However, it is a criminal offence to display sexually offensive or other indecent behaviour in the presence of or towards someone who has not consented to it.

Sunbathing generally isn’t considered “sexually offensive”, but if your neighbour has a problem with your nudity, it could be considered a breach of the Neighborhood Act. 

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