House prices have fallen in Norway since last autumn. The dip comes after two years of robust growth and high demand in the Norwegian property market.
Much of the demand was triggered by historically-low interest rates making mortgages more affordable.
Over the past few months, several forecasts have indicated that home prices in Norway will fall for at least the first half of the year.
Analysts think this is due to a strong rise in interest rates throughout 2021 and 2022. Norway’s central bank, Norges Bank, has increased the key policy rate strongly in an attempt to control inflation.
DNB Markets, the securities division of the bank DNB, believes that house prices in Norway will likely bottom out by April, business and financial site E24 reports.
DNB Markets has issued such an optimistic forecast because it doesn’t believe that house prices follow interest rates as closely when interest is raised as when it is decreased. This means that house prices rise faster when rates are dropped but fall slower when they are increased.
“We have had a few rounds internally and have come to the conclusion that it does not look as bad as our gut feeling might suggest,” Oddmund Berg, a senior economist at DNB, told E24.
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For this reason, the bank’s securities division also forecasts that property price decreases won’t be as steep as other financial institutions have predicted either.
Handelsbanken and Nordea Markets predict falls of four and five percent, respectively, this year, while DNB believes house prices will drop 2.6 percent.
In addition, it believes that the market will return to prices seen during the August 2022 peak by 2025.