Norwegian property only for those aged 40 and over
Property inflation in Norway has reached a level whereby most people would have to save for 20 years before being able to afford even 30 square metres of space.
To buy a residence of that size in Oslo would require monthly savings of about NOK1,300 (€171) over two decades to afford an 85% loan-to-value.
However, to buy a residence of 50 square metres in Oslo within five years would require saving NOK6,000 (€792) per month to be able to afford a 15% deposit.
The figures are contained in a report drawn up by Nordea for local newspaper Dagens Næringsliv.
“30 square metres when you are 40 years old is not fun,” said Christine Warloe, private economist at Nordea.
As the capital, Oslo’s figures may stand out, but the cost of saving for a deposit on property remains high throughout the country, Nordea’s figures suggest.
To acquire 50 square metres would require monthly savings averaging NOK1,000 (€132) over 20 years, the figures suggest, despite the country remaining one of the most sparsely populated developed markets.
The findings underscore the challenge facing monetary policy makers at Norges Bank. They are struggling to stop a property asset price bubble, but do not want to undermine competitiveness of exporters trying to do business in the face of a strong NOK compared to currencies in key export markets.
Figures published in the central bank’s Survey of Bank Lending 2012 Q1 pointed to tightening credit conditions for households during the period, following tougher loan condition guidelines published by regulator Finanstilsynet.
The regulator noted in its Risk Outlook 2012, published in March, that many households remained vulnerable if interest rates were to rise.
Issues of property prices and deposits remain critically linked to the domestic funds industry because of the effect it can have on net investment levels. For example, Norwegian fiscal rules are such that second properties are often seen as more tax efficient than investing in mutual funds, which hampers the fund industry’s overall efforts to convert additional savings into collective investments.
The Nordea research into the effects of residential property price appreciation suggests that the choice is increasingly difficult at the retail investor level between saving to purchase property or investing.