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Everything you need to know is included in our Norway Property Pack
Are you thinking of investing in property in the land of Fjords? Are you wondering if it's the right time to buy?
People have different understandings of market timing. Your Norwegian friend might suggest that now is the ideal time to buy property, while your colleagues in Oslo may think that prices will soon decline.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Norway, we rely on reliable data and statistics instead of personal opinions or rumors when we work.
We have collected and examined all the official reports and statistics from government websites. Based on this extensive research, we have compiled a complete and reliable database. Here's what we discovered, which can assist you in deciding whether now is the right time to purchase real estate in Norway.
We hope this article proves valuable to you.
How is the property market in Norway these days?
Norway is, today, an incredibly stable country
Positive
Stability is the most important factor to consider when purchasing a property in a country. It ensures long-term security, protects investments, and promotes a favorable environment for economic growth and personal well-being. It is an information you need as a foreigner looking to buy a property in Norway.
You probably know it already, Norway is extremely stable. The last Fragile State Index reported for this country is 15.6, which puts it in the top 10 globally.
Norway has a strong economy and a high standard of living, which has enabled it to invest in social services and infrastructure, creating a strong foundation for stability. Additionally, Norway has a strong democratic government and a commitment to human rights, which further contributes to its stability.
First signal is very positive, let's now look at the economic forecast.
Norway is positioned for growth in the coming years
Positive
You have to check the country's economic health before making a property purchase.
According to the IMF's estimations, Norway is set to conclude 2023 with a growth rate of 2.2%, which reflects the country's forward momentum. Regarding 2024, the consensus estimate is 2.5%.
On the longer term, the growth will still be there since Norway's economy is expected to increase by 9.3% during the next 5 years, resulting in an average GDP growth rate of 1.9%.
The moderate growth rate in Norway is a good thing for investors because it provides a stable and sustainable rate of return on their investments, while still allowing for potential appreciation in the value of their property.
Nevertheless, there are other indicators to watch.
Norwegian business owners still don't express confidence in current market conditions
Negative
How do Norwegian perceive their economy? The GDP forecast won't tell us. Fortunately, in Norway there is an established metric that is routinely disclosed. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a metric that assesses business leaders' confidence in the current and future economic conditions, derived from surveys and assessments.
The Statistics Norway's data indicates that the Business Confidence Index is currently -1 for Norway. For interpretation, it's quite low.
Unfortunately, we're on a descending trend. The score, 12 months ago, was at 7.
This score is not necessarily a bad thing. First, BCI index has dropped in many countries in the world recently. Also, low confidence scores sometimes reflect temporary uncertainty, which is a normal part of economic cycles.
Let's examine additional data to determine if it's a good time to invest in Norway.
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Norway is dispensing less building permits
Neutral
The number of permits issued for development projects can help you decide if it's a good time to buy property in a country. More building permits being delivered showcases a strengthening property market with promising prospects.
Unfortunately, the number of building permits issued is declining in Norway.
Over the past year, according to Statistics Norway, the number of building permits granted by Norwegian local institutions fell by 3.8%, from 29,786 to 28,664 units.
Without a doubt, this is a discouraging signal. Let's analyze more data.
But before that, keep in mind that if there is a reduction in building permits, it will result in a diminished supply of real estate. Consequently, there is a higher chance of property prices increasing in Norway in 2024.
Norwegian housing market on a 5-year rise
Positive
Norway's home prices have increased by 23.7% in 5 years according to Eiendom Norge/Real Estate Norway.
It means that if you had bought a log cabin in the Norwegian Fjords for $750,000 five years ago, then it would now be worth around $928,000.
Recently, there has been a notable long-term upward trend in Norwegian house prices, accompanied by monthly fluctuations.
Certainly, it's a positive indication. If you are considering purchasing a property in this country, and if this trend persists, there is a chance your investment will appreciate.
You can find a more detailed analysis of the real estate prices in our property pack for Norway.
Everything you need to know is included in our Norway Property Pack
Norway's population is growing and getting (a bit) richer
Positive
When seeking to acquire real estate, population growth and GDP per capita should be given careful thought because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Norway, the average GDP per capita has changed by 4.3% over the last 5 years. It's not much, but the growth is here. Furthermore, the Norwegian population is growing (+2% in 5 years).
This means that, if you purchase a cozy cabin in the Norwegian fjords and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, there might be a rise in rental demand in Norwegian cities like Oslo, Bergen, or Trondheim in 2024.
Rental yields are average in Norway
Neutral
Rental yield is a commonly accepted measure for evaluating real estate investments.
It's the annual rental income of a property divided by its price. For example, if a Norwegian property is purchased for 3,000,000 NOK and generates 150,000 NOK in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Norway offer gross rental yields ranging from 1.9% and 4.6%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Norway.
It means that your income potential is relatively moderate.
As previously observed, the supply of real estate will remain constant, indicating that property prices are unlikely to change. However, there might be a slight growth in the number of affluent tenants. Consequently, rental yields might increase in Norway in 2024.
Everything you need to know is included in our Norway Property Pack
In Norway, inflation is expected to be moderate
Neutral
Inflation is the long-term increase in the prices of goods and services.
It's when your favorite cup of coffee in Oslo costs 40 Norwegian kroner instead of 35 Norwegian kroner a couple of years ago.
If you're considering investing in a property, high inflation can bring you several advantages:
- Property values tend to increase over time, potentially leading to capital appreciation.
- Inflation can result in higher rental rates, increasing the property's cash flow.
- Inflation decreases the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, helping preserve the investment's value.
- Diversifying into real estate provides stability during periods of inflation.
In accordance with IMF projections, over the next 5 years, Norway will have an inflation rate of 11.7%, which gives us an average yearly increase of 2.3%.
This data infers that Norway may face inflation in the near future. In such a situation, buying property now becomes an option to consider.
Is it a good time to buy real estate in Norway then?
Time to conclude !
Considering the prevailing conditions, 2024 offers a promising opportunity for property investment in Norway, driven by a combination of favorable indicators. The remarkable stability of the country, combined with its projected growth, establishes a secure foundation for potential investors. The Norwegian housing market's upward trajectory over the past five years reinforces its allure, suggesting a trend of property value appreciation.
Furthermore, the steady growth in Norway's population, coupled with their improving economic situation, points toward an increased demand for housing. This can potentially lead to long-term value appreciation, making it an appealing time for property acquisition.
While some neutral aspects must be considered, such as the decrease in building permits and average rental yields, these factors are balanced by the overall positive signals. Additionally, the expectation of moderate inflation adds a level of predictability to the investment landscape.
However, it's important to acknowledge the hesitancy expressed by Norwegian business owners regarding current market conditions. This negative sentiment could indicate some underlying economic challenges, and potential investors should closely monitor this sentiment to assess its potential impact on the property market. Despite this concern, the aggregate of favorable and neutral indicators makes 2024 a prospective year for property investment in Norway.
We genuinely hope this article was useful!. If you need to know more, you can check our our pack of documents related to the real estate market in Norway.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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