Property prices in Norway have risen 12.5 percent nationally compared to the same time last year, according to new figures from Statistics Norway. 

In addition to this, prices rose 2.7 percent from the first to the second quarter of 2021, with values increasing in every county in Norway. 

The average price of a property in Norway in June was just shy of 4.4 million kroner (approximately $505,000) according to numbers from Real Estate Norway, the national association for estate agents in the country.

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Where have house prices been rising? 

Compared to last year, house prices have grown strongly across the board. The most robust growth was in Vestfold, Telemark and Viken, where prices rose by 15 percent. The slowest growth was in Møre and Romsdal and Vestland if you exclude house price rises in Bergen; houses still rose by just under ten percent in those areas. 

Detached and semi-detached houses grew in value the most while prices for apartment blocks grew the slowest. 

What’s causing house prices to rise?  

The rise in housing prices has primarily been driven by low interest rates.

Norges Bank, Norway’s central bank, slashed interest rates to zero last in May last year due to the coronavirus pandemic. 

“Most of the price increases over the past year can be attributed to the interest rate effect,” Røed Larsen from Housing Lab, a property think-tank, told online news site Nettavisen. 

Lower interest rates mean more people are willing to borrow money to make big purchases such as houses, leading to a massive surge in demand across Norway. 

Houses are selling in record amounts and the average time a house spends on the market in Norway before being bought is just 29 days as of June 2021.  

According to Norges Bank, interest rates aren’t the only thing driving demand; pandemic restrictions have left people itching to splash out on a place of their own. 

“Increased use of home offices and limited consumer opportunities to spend disposable income has probably also increased demand,” the bank said in its monthly report for June. 

How long will prices continue to rise? 

Experts have said that house prices are unlikely to continue to skyrocket as they have done over the past year and are instead facing a “headwind” in the form of higher interest rates on the horizon and stricter credit regulation. 

“The strong rise in house prices is facing headwinds in the form of higher interest rates, stricter credit regulation and high construction activity in several places,” Christian Fengstad Bjerknes of the Co-operative Housing Federation of Norway (NBBL) said in June.

“We are likely to have a period of moderate price development. However, it is not unlikely that prices will fall over the autumn, as they typically did before the pandemic,” Real Estate Norway’s managing director Hennig Lauridsen had previously predicted when speaking to financial site E24.

Lauridsen believes that the pandemic will continue to have a long-lasting effect on the demand for housing in Norway. 

“We believe that the strong demand for housing in Norway will persist and that the pandemic has led to a lasting shift in the housing market,” he said. 

Looking ahead to 2022, there’s plenty of uncertainty over the future of house prices as Minister of Housing Nikolai Astrup has laid down new rules that will regulate housing valuations in Norway. 

The new regulations are set to come into effect on January 1st 2022, unless they are scrapped by the current government or a new coalition government after September’s general election. 

“This new legislation would regulate over 100,000 transactions in the housing market and will have major consequences for Norwegian consumers with increased costs, increased risk and increases insecurity if the legislation isn’t properly done,” Lauridsen said. 

What will the changes to interest rates and regulation of property valuation mean for you? 

In short, this is good news for those looking to buy or get on the property ladder but bad news for those looking to sell over the next couple of years. This is because higher interest rates will gradually bring house prices down. 

“We expect a better balance between supply and demand with a shift from a seller to a buyers’ market. This (interest rate rising) will provide a more sustainable housing market in the time to come,” CEO of the Norwegian Real Estate Association Carl Geving said in the associations latest monthly report. 

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Interest rate price rises could also hit the pockets of those who have recently bought a property with a flexible rate mortgage, as interest rates are expected to rise 1.5 percent by the end of 2022. 

Furthermore, if the new regulations on property valuation do come into force then those selling their house may get less than they were expecting depending on how well the rules are implemented.