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UPDATE 1-Norway's housing market cools further in July
August 3, 2017 / 12:54 PM / 3 months ago

UPDATE 1-Norway's housing market cools further in July

* July s/a housing prices -0.2% m/m, +4.8% yr/yr

* Real Estate Norway: negative price development to continue

* Real Estate Norway: normalisation seen early next year

* Norway finance minister says market cool down is natural

* Economists say prices weaker than c.bank expected

* Economists don’t expect this to change c.bank policy (Adds economist, finance minister quotes, context)

OSLO, Aug 3 (Reuters) - The Norwegian housing market is expected to cool further this year after prices declined for the third consecutive month in July, but economists see it having little effect on the central bank’s interest rate policy.

Seasonally adjusted housing prices fell by 0.2 percent in July from June as the cost of buying a home continued to ease from recent record highs, the industry association Real Estate Norway said on Thursday.

Unadjusted house prices fell by 1.2 percent in July from June.

Year-on-year, prices rose by 4.8 percent in July, slowing from 6.3 percent in June and down from 13 percent in February, data compiled by Real Estate Norway, FINN and Eiendomsverdi showed.

Tighter mortgage regulations, lower population growth and a boom in construction, flooding the market with new homes, have all contributed to the recent market turnaround.

The decline in the housing market will probably continue over the next few months, with a normalisation possible early next year, head of Real Estate Norway Christian Dreyer said.

Economists at Nordea Markets and Handelsbanken said the price development is weaker than expected by Norway’s central bank, but it should not trigger changes to its monetary policy.

“As long as the downturn remains mainly an Oslo phenomenon we think the impact on monetary policy will be limited,” Nordea Markets said in a note.

Norwegian housing prices have risen sharply in recent years, particularly in and around the capital, as demand for homes has outstripped supply.

On Thursday morning the central bank’s lending survey showed that banks in general had tightened credit practice to households somewhat further in the second quarter.

“At this stage we believe the ongoing cooling is regarded as welcoming news, and not something that will cause Norges Bank to change its strategy,” Handelsbanken said in a note.

The right-wing minority government, which is facing parliamentary elections in September, has tightened regulation of mortgages in a bid to rein in the housing market, forcing banks to become more selective.

The government was not planning to take any additional measures, the country’s Finance Minister Siv Jensen said.

“What we see now is a natural cool down of a housing market which has been very heated for a long time,” she told reporters earlier on Thursday. (Reporting by Camilla Knudsen and Alister Doyle, editing by Nerijus Adomaitis and Pritha Sarkar)

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