July 4, 2018 / 11:12 AM / a year ago

UPDATE 1-Weaker Norway housing prices, rate hike still expected

(Adds analyst reaction, comments from CEO Real Estate Norway)

OSLO, July 4 (Reuters) - Norwegian house prices steadied in June, a weaker outcome than had been forecast by the central bank and economists, but a rate hike in September is still widely expected.

Seasonally adjusted prices were unchanged in June from May, and rose by 1.5 percent year-on-year. Unadjusted prices fell by 1.0 percent in June from May, Real Estate Norway said in its monthly report on Wednesday.

“An increase in supply of new homes, rate hikes from September and low population growth is expected to dampen house price growth ahead, but we don’t expect a sharp downturn as the macro outlook in general is very positive,” DNB Markets said in a note, adding that today’s data “does not change our view of a rate hike from Norges Bank in September”.

Norway’s central bank said in June the key policy rate would most likely be raised in September from the current record low of 0.50 percent.

Real Estate Norway maintained its forecast for a price decline of 1.0 percent year-on-year in December 2018.

“We see no need to revise the forecast substantially, but we do expect somewhat more positive development than we did at the start of the year,” head of Real Estate Norway Christian Dreyer told Reuters.

The association normally revises the forecast after the first six months, but says price development in Oslo is now too uncertain to predict.

Prices have recently recovered sharply from a 2017 correction that was driven by tighter mortgage regulations, lower population growth and a boom in construction that has since abated.

The housing data was compiled by Real Estate Norway, FINN and Eiendomsverdi. (Reporting by Camilla Knudsen, editing by Gwladys Fouche)

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