Housing Market in Oslo Reaches for the Sky: Are there Bubble Tendencies in the Housing Market?

Jens Krogh Halvorsen & Bendik Valheim Lem

Student thesis: Master thesis


This master’s thesis aims to investigate whether there exist bubble tendencies in the housing market in Oslo as of 31.12.2019. To answer this problem statement, we have chosen to assess the housing market using four approaches, where each approach aims to answer their respective research question. First, we conduct recognized empirical analyses, namely the Hodrick-Prescott filter, Tobin’s q ratio, the Price-to-Rent Ratio, and the Price-to-Income Ratio. Here, we find that the housing market in Oslo is overvalued according to three out of four analyses, therefore indicating the presence of bubble tendencies. Second, we assess Jacobsen & Naug’s fundamental house price factors, namely disposable income, interest rate, unemployment rate, and new housing units. Additionally, we include population growth as a factor. Here, we find that four out of five fundamental factors support the price growth, pointing towards no bubble tendencies in the housing market. Third, we evaluate indirect aspects that have an impact on house prices, namely governmental legislation, housing taxation, the credit market, and psychological factors and expectations. Here, we find that three out of four aspects do not support the presence of housing bubble tendencies. Lastly, we evaluate the housing market by applying Case & Shiller’s housing bubble criteria. Here, we find that all criteria are fulfilled. This suggests that there are bubble tendencies present in the housing market. Towards the end of the thesis, we include an “extra chapter” that describes the effect that the coronavirus outbreak has had on the housing market in Oslo. Here, we find that the coronavirus, with its following governmental restrictions, may put downward pressure on the house prices. Conclusively, the analyses conducted in the thesis give conflicting results. The empirical analyses and Case & Shiller’s criteria mainly support bubble tendencies, while the fundamental factors and indirect aspects mainly do not. We do, however, conclude that there are some bubble tendencies in the housing market in Oslo, but that they are not worrisome for the time being.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2020
Number of pages137
SupervisorsJens Lunde