Things to know before buying your first apartment in Norway?

[u/taukeh]

What should one really consider/know about before making such a purchase(getting a loan)? Especially when not sure if one will stay in Norway for more than 6 years.

Having a debt for the rest of one's life seems pretty daunting. At the same time, everyone is just trying to get their first home ASAP argumenting it with "even if I leave Norway, I can sell it and have some extra cash". Am I missing something? Does real estate appreciate this fast in Norway? Also, wouldn't one still lose because of interest?

[u/NhcNymo]

You are missing something.

Wouldn’t one still lose because of interest?

Depends on how the market develops, but for 2024 on average the answer is no. In 2024 the price of property increased with 6.9% [eiendomnorge.no] while new loans have an average interest of 6% [rentradar.no]. That means most people turned a profit.

However, what you’re missing is the fact that everyone needs a place to live.

Owners have loans and pay a significant amount of interest, but due to appreciation of the market, they have a chance to turn a profit on their investment (as I showed that most people did in 2024).

However, renters do not have this chance. All rent is an expense. No chance to turn a profit.

Very roughly calculated, a NOK 3m loan will cost you 15k a month in interest. That is basically the same as you would expect to pay for rent (in Oslo).

The owner who pays 15k/month on their interest has a chance to earn this back through appreciation. Renters do not have this chance.

[u/AspiringCanuck → u/NhcNymo]

The NOK has also declined by over 50% compared to the US dollar between 2012 and 2024. Wage growth has been no where close to real estate price growth. The NOK devaluing has been a release valve, and I fully expect this trend of currency devaluation to continue until policy makers in Norway allow an asset price correction.

To use a particular example, I was looking at a Townhome in Norway, which is for roughly 1M NOK higher than what they bought it for in 2019, but in USD terms it had actually fallen in price, and this was a while ago, before the recent US dollar rise. Those same townhomes has fallen dramatically in USD terms and fallen even in Canadian dollar terms.

Norway is sacrificing its currency in real terms to bail out nominal asset valuations. In the finance world, this is how you 'default' on household debt in all but name. And there appears to be very little to no willpower by politicians to reverse it.

[u/Giggling_Gecko → u/AspiringCanuck]

I dont have a clue why the NOK has gone down this much against the dollar other than lower demand for oil. But always figured that explanation to be too simplistic. So could you explain how high property values (in NOK) and household debt causes low currency value? And how a price correction in the property market will reverse it? Asking, since in my mind those factors are not connected.

[u/AspiringCanuck → u/Giggling_Gecko]

To clarify, property prices falling does not cause the NOK to strengthen. It’s the steps necessary to strengthen the currency that would have the knock-on effect of causing household default, forced sales, and forced sales is when comparables start to fall fast, resetting the valuations of all homes in the area. Norges bank right now is trying to straddle the line of protecting the currency as much as they can while also minimizing the damage on household spending. The NOK would be in the utter toilet right now if interest rates were lower.

Cheapening credit and policy incentives have resulted in Norway having the highest housing debt to disposable (after-tax) household income in the world, with most of that debt on the short end of the interest rate curve. Similar is happening in Sweden, but they at least their households are mildly starting to delever themselves, whereas Norway’s are not. There is no way for the central bank of either Norway or Sweden to strengthen the currency, with the policy tools available to them, without causing serious "interest rate risk" on assets to unfold. Interest rates in Norway would have to go even higher than they are right now, which would cause distress among households, a balancing sheet recession, forced selling that can lead to a mania of selling as folks try to 'exit' their asset holdings, the inverse of the buying mania when people are buying homes thinking the price will go up, so they better 'get in' now.

A lot of Norwegians confuse oil prices with NOK strength, when that isn’t the whole picture.

[u/assblast420 → u/NhcNymo]

In 2024 the price of property increased with 6.9%

At the same time, the KLP Global Indeks (or similar indexes) is up 34%. So it's not that straight forward really.

Personally if I knew there was a high chance of me leaving the country in 6 years, I would rent and invest.

[u/ArgumentAdorable7528]

I don’t know where in Norway you’d want to buy but I think if you buy now you’d be buying at the peak or almost at the peak. I don’t see how prices can continue to increase as Norway becomes less attractive for foreign workers and people who “live” in Norway are struggling already.

[u/ArtisticRoom4211]

The exchange rate of the crown against the main reserve currencies is falling catastrophically. The purchasing power of the crown is decreasing. Buy an apartment for $500,000 today. Tomorrow, it will cost $100,000

But the "experts" will assure you that you are in profit by as much as 0.9% compared to inflation of 6%.