A typical Oslo homeowner has earned around three ordinary annual salaries since 2007 from rising prices in the housing market. You win without lifting a finger.
The housing market creates and redistributes great fortunes. Some are left alone with high debt. House prices affect Norwegians’ finances more strongly than salary supplements and share prices.
From early 2003 to August this year, house prices have risen just over 200 percent. A house worth NOK 1 million has risen to just over NOK 3 million.
But who has benefited from the strong growth in house prices? How old are they, where do they live and how much have they earned?
The profit is 1.1 million.
Researchers Erling Røed Larsen from the Oslo Met University Housing Laboratory and Terje Eggum from the analysis company Eiendomsverdi have tried to answer. They have studied in great detail earnings from early 2007 to early 2019 for just over 77,500 homeowners. On average, home prices increased 73 percent during these years.
If all these owners are placed one after the other, the profit for the intermediate owner is just 840,000 crowns. The average profit is NOK 1.1 million.
But this figure covers a very wide margin of earnings measured in crowns.
– Expensive housing has increased more than affordable housing, calculated in crowns. Older homeowners have generally earned more than younger ones, and inflation has been much higher in Oslo than in the rest of the country, says Røed Larsen.
Highest price increase in Oslo
Oslo stands out. Homeowners’ earnings in the years 2007–2019 have been much higher than in the rest of the country.
But the differential in modified home values within Oslo is strong, calculated in crowns. The researchers place all the owners one after the other to make a profit and divide the row into 100 groups:
- For the 90th group of owners, the housing gain in Oslo is NOK 3.4 million.
- For the Oslo owner in the middle, it’s 1.7 million crowns.
- For the tenth group, inflation is 0.8 million.
This means that eight out of ten homeowners in Oslo have made a profit of NOK 0.8–3.4 million in these years.
Many annual wages earned
The increase in home values can be compared to the increase in wages. From 2007 to 2019, the average annual salary increased from just under NOK 380,000 to just over NOK 575,000, according to Statistics Norway.
In other words: a 12-year increase in value for the 90th group of homeowners in Oslo corresponded to six average annual wages. The gain was more than 15 times greater than the increase in wages in the total for 2007-2019, calculated in current crowns.
For the Oslo landlord in the middle, ranked by housing gain, the growth corresponded to three average annual salaries in 2019.
Win on the lap
Røed Larsen says owning a home in Oslo has been beneficial, although the variation in profit is large. But it has been easy.
– The gain differs from other financial gains. In the housing market, it has not come because the owners have been particularly good or have worked hard. It is enough to own something, he says.
– But, does the rise in house prices give more money to spend for those who live there?
– Yes, because the owner’s wealth has increased. The increase in home values can be used, for example, to obtain more loans. The profit from the home is then converted to money in the account. The prize will also be a ticket to the next step on the housing ladder, either in Oslo or by buying something bigger outside of Oslo, says Røed Larsen.
Lower inflation outside of Oslo
Norway is more than Oslo. Researchers have also asked all homeowners outside the capital one after another after rising value increases from 2007-2019.
For homeowners outside of Oslo, it turns out that:
- For the 90th group, the profit is almost NOK 1.7 million.
- For the owner in the middle, it is 0.8 million crowns.
- For the tenth group, the housing gain is 0.4 million.
It is far behind Oslo, but it is still a lot of money compared to a regular annual salary.
Researchers find that the distribution of homes by value has become more skewed between 2007 and 2019. This means that inflation has been higher in percentage terms for expensive homes than for relatively low-value homes.
Additionally, homeowners born in 1965 and 1975 have experienced the most growth in their home prices.
The reason is probably that the oldest cohorts in the survey have come higher on the value ladder in the housing market. A certain percentage price increase therefore gives a higher profit calculated in crowns.
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– Norwegians as a whole will not get rich from rising house prices, unless we sell the houses to foreigners. Norway is only getting richer as the number of households increases, says Røed Larsen.
On the other hand, the distribution of wealth within the country changes significantly due to the strong growth in house prices.
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