Bubble Index

Norwegian housing prices have continued to grow rapidly in Norway during the pandemic, and our most recent update suggests that Norwegian house prices were overvalued by 9 percent in 2020q3. While our estimates suggest that house prices were overvalued in 2020q3, it should be noted that quarterly figures are somewhat volatile – just like daily numbers on number of Covid-infections. Therefore, one should be careful in drawing the conclusion that this is a sign of bubble-behavior. To evaluate this, it may be better to look at trend-developments. For this reason, we also provide a figure (figure 2), where we smooth both the fundamental trajectory and the actual price developments. The trend is indicating some overvaluation, but that the gap is narrow and that it has been closing over the past year.

Figure 1

Figure 2

About the index

Housing Lab estimates fundamental house prices for Norway and compare them to the evolution of actual house prices. Fundamental house prices are determined by real per capita income, real after tax interest rates, and the housing stock per capita. Our estimates of fundamental prices are updated and published on a quarterly basis. Due to lags in the construction of the National Accounts data used to estimate fundamental prices, our estimates lag by one quarter. The underlying methodology is  based on published research and is documented in Anundsen (2019).