Rental prices in Oslo have surged by 30 percent over the past three years, according to figures from Finn Eiendom, the property section of Norway’s largest online marketplace, Finn.no.

As of January this year, the average monthly rent for an apartment in the capital was 17,900 kroner, up 3,500 kroner from 14,400 kroner in 2021.

READ MORE: Where in Norway have rents increased the most?

Similar trends of rapid rent growth have been seen across major Norwegian cities. Nationwide, there are between 10,000 and 15,000 too few rental properties available for rent. 

Rising demand and limited supply

Oslo’s population has been boosted by both natural population growth and immigration. This has outpaced the rate of new housing being built.

The city’s allure as an economic hub – it is the capital, after all – has attracted droves of residents, placing immense pressure on the rental market.

Kjetil J. Olsen, the managing director of the rental agency Husleie.no, said in press release earlier this year that the increasing population, coupled with a near standstill in housing construction, has contributed to surging rents.

On top of that, students moving to Oslo from all over the country to study, as well as the inflow of Ukrainian refugees to the capital, have both driven up demand.

The issue is expected to become more challenging as summer approaches and students who can’t secure student housing start looking at the private market.

This surge in demand clashes with a limited supply of available housing units.

Despite some efforts to incentivise construction, bureaucratic hurdles and zoning restrictions continue to impede developers, leading to a shortfall in available properties.

READ MORE: Could looser regulations combat rising rents in Norway?

Regulatory constraints

Regulatory measures play a pivotal role in shaping Oslo’s rental landscape – and the strict regulations governing property development are a significant hurdle in terms of growing supply.

Most real estate industry experts agree that zoning restrictions and taxes on second homes drive up rent prices, as they restrict supply and result in stagnant construction.

Zoning restrictions limit the areas where new construction can occur, while policies such as increased taxes on second homes, dissuade property owners from entering the rental market or prompt them to sell existing properties, further constraining supply.

Furthermore, Oslo also struggles with a critical shortage of small apartments, which is particularly problematic for young renters and students.

READ MORE: Thousands of small apartments are needed in Oslo to address housing shortage

Restrictive city policies, including bans on constructing apartments below a certain size, exacerbate the issue.

As a result, people seeking affordable accommodation are forced to contend with higher rents for larger units or seek alternatives which aren’t centrally located.

Interest rates, inflation, and stagnation in housing construction

Rising interest rates and high inflation have also driven up the cost of renting in the Norwegian capital.

Increased overheads, driven by mortgage repayments and tax liabilities, mean landlords pass on these expenses to tenants.

Therefore, as wages fail to keep pace with a rising cost of living, tenants face mounting pressure to allocate more of their earnings toward housing expenses.

So, despite the pressing need for affordable housing, a lack of new construction projects (which is unlikely to go away anytime soon) perpetuates the scarcity of available properties.

At the same time, regulatory hurdles, financial constraints (such as the high cost of construction materials), and zoning restrictions all contribute to the sluggish pace of housing development.

The urgency for implementing measures to address the housing crisis through policy reforms and investment incentives has reached an unprecedented level, and renters are understandably concerned.

However, regrettably, industry experts in the real estate sector agree that minimal relief can be anticipated in the short and medium term within Norway’s major cities.

Projections indicate that prices will continue to climb even higher by the year’s end, and several industry organisations, such as Real Estate Norway (Eiendom Norge) have expressed concerns.

READ MORE: Why the cost of renting in Norway will continue rising sharply