Bloomberg News

Norway House Prices Surge in December, Adding to Rate Pressure

January 02, 2013

House prices in Norway rose the most in more than a year in December as near-record low interest rates fueled home buying, increasing pressure on the central bank and financial regulators to cool credit growth.

House prices, which have doubled since 2002, rose an annual 8.8 percent in December compared with 7.5 percent in the prior month, the Norwegian Association of Real Estate Agents said in a statement today. Prices gained a seasonally adjusted 1.7 percent in the month and rose 7.7 percent for all of 2012, according to the Oslo-based organization.

The world’s fourth-richest nation per capita is withstanding a recession in the euro area, and even displaying signs of overheating, amid record investment in Norway’s petroleum industry. The central bank kept its benchmark interest rate unchanged at 1.5 percent in December and stuck to a plan to raise rates as soon as March.

“The figures confirm our long hold view that the housing market needs some kind of stabilizing factor,” said Frank Jullum, chief economist for Norway at Danske Bank A/S. “We will see some measures from the government in 2013, aimed at damping the housing prices.”

The Finance Ministry last month moved to stem household lending as the central bank estimated private debt levels will exceed 200 percent of disposable incomes in 2013. The government proposed an increase in risk weights on mortgages to 35 percent, about triple current levels, and wants to place limits on covered bond lending. The central bank will also, starting next year, advise the ministry on countercyclical buffer requirements for banks.

Stricter regulation is seen helping to cool house price growth. Leif Laugen, a deputy leader at the Association of Norwegian Real Estate Broking Companies, estimates growth will ease to a “moderate” 4 percent to 6 percent in 2013.

Weak global growth prospects abroad have curtailed the central bank’s scope to address overheating risks without fueling krone gains. Central bankers in the euro area, the U.S. and Japan have resorted to additional stimulus, pushing rate increases further out in time.

To contact the reporter on this story: Kristin Myers in Oslo at

To contact the editor responsible for this story: Jonas Bergman at

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