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Housing boom expected to level out

Experts predict that the large price increase in the Norwegian housing market, particularly evident at the beginning of the year, is coming to an end.

According to real estate experts, the interest rate affect is not as large as before, and the housing prices are now expected to level out in the time to come.

A panel consisting of six real estate experts estimated just before New Years that the housing prices would increase with 6.2 percent in 2004. After the first six months, the prices had increased with as much as 11 percent, according to the Norwegian financial paper Dagens Næringsliv.

Based on the massive growth in the beginning of the year, experts updated their predictions to a total price growth of 10.9 percent in 2004, and it appears as the price growth is levelling out.

«The housing prices may turn downwards as soon as next year,» said Harald Magnus Andreassen, chief economist at First Securities, to the paper. «We expect the Norwegian interest rates will increased by the end of the year, and that the increase will continue until reaching more ordinary levels in 2005.»

Øystein Dørum, chief economist at DnB NOR Markets, said he estimates an increase of 11 percent on housing prices this year. Dørum has adjusted down his predictions from March of this year where he estimated an increase of 15 percent. Prognosesenteret expected an increase of 8 percent, while Econ Analyse predicted a levelling out or a slight price fall during the rest of the year.

Real estate investor Bjørn Rune Gjelsten said he thinks in worst case scenario there will be a flat development during the rest of the year. Gjelsten estimates that a possible increase will be somewhere between four and five percent.

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