Høy rente slår inn i boligmarkedet: – Prisene vil falle

A stronger connection between interest rate changes and home price growth has been established by chief economist Hilde Midsem of the Norwegian Real Estate Developers' Association (NBBL). Last week, the central bank raised the policy rate to 4.5 percent, simultaneously adjusting the interest rate corridor. Midsem explained that for every one percentage point increase in interest rates, home prices tend to fall by ten percent.

The central bank's recent monetary policy report anticipates lower home price growth, projecting a 3% annual increase this year, compared to 5.9% last year. Next year, annual growth is expected to slow to 3.6%. This represents a significant adjustment from the bank's expectations in March.

Midsem noted that a clear interest rate effect has been observed in the housing market throughout the year. This year's housing season has been notably cooler than last year's. She expects home prices to fall, apart from seasonal effects, as the country's prices vary, particularly in the South West region and Tromsø. The bulletin on September housing prices will be released next Monday.

Privatmegleren's Grethe Meier points out that households have already adjusted to the latest interest rate change, and therefore, it is unlikely to have a significant impact on the housing market. Meier stated that they did not notice the impact of the latest rate hike yet. The bank had signaled two interest rate cuts in 2025, with the last cut only in January.

However, the uncertainty is still present in the market. Many are sitting on the sidelines, waiting for clarity on future interest rate movements, according to Meier. In the rental housing market, activity remains steady. Midsem believes the most evident interest rate effect is seen in the new home market. New home sales in August were the weakest August in over a decade since the monthly tracking began in 2010 by the Real Estate Developers' Association.

The year before saw 48% fewer new homes sold compared to 2021. Therefore, the new home market is operating at half pace. On the supply side, the market has been high for some time, while households have gained increased purchasing power. Real wage growth over recent years has also contributed to this, and there are indications of real wage growth this year as well, according to Midsem.

These factors are slowing down the housing market. Meier speculates that this could be due to the numerous options available, making buyers wait longer for a decision. Sellers seem to be aligning themselves with reality in terms of pricing, Meier added.