An Analysis of the Price Development in the Norwegian Housing Market

Angela Shala & Thea Fu Lin

Student thesis: Master thesis


In recent years, the Norwegian housing market has received widespread attention in both national and international media. With a two-folded growth in real housing prices during the last 25 years, several institutions and practitioners have singled out the Norwegian housing market as especially worrying. Moreover, as the majority of residentials are owner-occupied, the housing market has great implications for households’ wealth and the overall economy of the country. The object of this master thesis has been to examine the development of housing prices in Norway and investigate the relationship between macroeconomic factors and the housing market.
When studying the dynamics of the Norwegian housing market, well-established economic and econometric models have been applied to analyze the relationship between housing prices and macroeconomic factors. The purpose of the economic models is to investigate whether the growth in housing prices is sustainable, while the econometric model examines and identifies which macroeconomic factors have the greatest influence on housing prices. Both the Hodrick-Prescott filter and the price-to-rent ratio find evidence of sustainable growth for the entire country. The increase in Oslo is, however, found to be unsustainable. The econometric study reveals that the interest rate, unemployment, income, housing stock and public expectations are all significant factors that determine the development of housing prices in Norway.
Finally, the development in housing prices is to some extent supported by the movements in the fundamental factors included in the empirical analyses. The concern for the Norwegian housing market is mainly related to Oslo, as the growth in housing prices has not been in line with macroeconomic factors. Conclusively, the price development of the country is expected to be more moderate in the years to come.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2017
Number of pages178