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Norwegian real estate prices have fallen for three months straight – and it’s making Swedes worried

The Norwegian real estate market seems to have peaked as statistics from Eiendom Norge show declining prices for the third month in a row, falling 1.2% in July as compared to June. Oslo saw a particularly severe drop of 2.8%.
“In recent months the housing market has seen a sharp decline in prices in Oslo, which has affected the statistics on a national level,” said CEO of Eiendom Norge, Christian Vammervold Dreyer, in a press release. He argues that the depressed prices are due to an oversaturation in supply, with no obvious end in sight:

“This is something we think will be characteristic of the market in upcoming months as well,” Christian Vammervold Dreyer said.
In Sweden there has long been worry about a possible housing bubble – real estate prices increasing by 40% in just the last three years – and with recently imposed stricter regulations on amortization, and even more on their way, what’s happening in neighboring Norway could be just around the corner.
“There is fear that there will be a repeat of what’s happening in Norway, with a weaker real estate market in Sweden as well, as further amortization regulations are at the door,” DNB Markets analyst Simon Mortensen tells Direkt.
In May, the Financial Supervisory Authority of Sweden proposed to impose a cap on household debt quotas. Households with more than 4.5 times their annual income in debt would be obliged to amortize 1% more than currently required.
According to OECD data, the Nordic countries have some of the highest levels of household debt to disposable income: Denmark at 293% of net disposable income, Norway at 222%, and Sweden at 178%.

OECD Chart: Household debt, Total, % of net disposable income, Annual, 2015
The European Commission warns in a report from May that the Swedish real estate market is overpriced and that there is risk of violent effects on the economy should the bubble burst. The commission also warns that there is a similar situation in Denmark.
In May, Goldman Sachs said that it expects a market correction in Sweden within two years with a probability of 35-40% – implying a drop in prices of at least 5%.
On a moderating note, Goldman Sachs simultaneously commented that Norway was constructing new housing faster than the demographics demand – the opposite of which is true for Sweden.