Kj has emailed in a summary of an article from the Norwegian FT, illustrating how deep seated Home-Owner-Ism is over there:
If there is no appreciation for the house you build, it can be a very poor investment economically, similarly if the new home you build simply costs more than it is possible to sell it for.
This is the case for many Norwegian builders outside pressure areas. Except in Oslo, the cost of building a house is much the same, writes Financial Times Norway. In Oslo, prices for existing homes were, on average, 90 percent of the price of similar new homes, compared to 80 percent along the oil belt in the West counties and Akershus.
But in half of the counties, homeowners, according to Financial Times Norway, must expect that well over 30 percent of the value is blown away in the second the key is in the door at the newly built home, a home from that moment suddenly has become a used home. In the counties of Nord-Trøndelag and Hedmark, existing homes are going for less than 60 percent of new homes.
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UPDATE. Here's the chart of Norwegian house prices since 1992:
18 comments:
It's truly bonkers. Isn't it? It isn't just me? I mean surely I am not going mad and it is bonkers? Or am I missing something?
L, the closer you look at Homey propaganda, the more inconsistencies there are. Therefore, we can safely assume that they are living in cloud cuckoo land, not us.
http://www.bbc.co.uk/news/uk-england-london-17986383
"Economic" journalists obviously think the concept of depreciation is something they just needed to pass first term of evening school. Nonetheless, the "survey" makes for a fine rough-numbers analysis of how what the land-price component of housing is. If we assume that the average house are halfway through their lifetime, and refurbished/maintaned well enough to be worth 2/3s of a new built, that means Oslo is 70% land-value, and the peripheral counties are close to neglible land-value.
"But in half of the counties, homeowners, according to Financial Times Norway, must expect that well over 30 percent of the value is blown away in the second the key is in the door at the newly built home, "
I'm completely baffled. How is this Home-ownerism? No HOist in this country expects their house to fall in value at all, let alone by 30%. That's thinking of a house like a car and who does that over here?
Kj, I don't know. What are land prices like in N?
B, it's completely HO-ist, the fact that they are so annoyed about the fact that buying a house is not an easy route to riches.
B: Never would a house won't fall 30% in value. The comparison is between the average house, which has depreciated, and a new built in the same area, ofcourse in a snapshot of one day will the thirty year old house be worth less than the new built next door. But house-prices on average are growing faster than in a long time, so land-value increases is gobbling up any depreciation (except for in the marginal areas, where a house may actually fall in line with depreciation). It's homeownerist because of it's total lack of understanding of both land-values and that houses are depreciating assets.
MW: In the central areas (Oslo), middle-class neighbourhoods with consent to build flats, maybe 5 million £ an acre, central commercial up to 8-10, but it's very variable with regards to consent. In my area, small industrial town, it's around 120K £ for 1000 sq ft with permission to build one house.
Sorry, 10.000 sq ft
Kj, 1,000 sq ft = 100 sq metres, that's absolutely tiny. Don't you mean 1,000 sq metres?
Kj, aha, thanks. That is still outrageously expensive, about the same as in the UK.
I believe the Norwegians have a lot of kit built woodenn houses (probably not in the centre of Oslo). This would suggest their costs will be more genuine building costs and less the regulatory parasitism that makes up 75% of UK costs, which in turn would explain why normal market rules, including depreciation, would apply.
This is the same country that built hundreds of kilometres of tunnels at £4 million per km - whereas here the Scottish government insisted that 3 km of tunnels, each way, under the Forth, would have to cost £6,600 million, so they went for a bridge only 8 times more expensive than equivalents elsewhere.
Neil: I'm sure there are building cost differences, but it's probably not because of less bureaucracy. You can't build a house anymore which isn't be "accesible" by some paralysed up to the neck as of new...
In the really marginal areas, I'm sure there are plenty of examples of some escapee from the city building a small mansion in the sticks, one of them realised he couldn't possibly flip it on the local market when he got tired, and tipped of their school-buddy, who is an FT journalist, of this strange phenomenon of houses not actually appreciating in value...
But that's how house prices should behave. In a world where land prices were static, houses would depreciate continually in price as a result of wear and tear. Only continual maintenance would keep their prices up. In fact even in our world that is how it works in areas where land prices are only gradually increasing.
Derek: that what the article tries to imply is happening, and isn't, except in the marginal areas, where the population and turnover of houses is small. House prices are increasing as usual, but the statistics only shows that at any one time, newer homes are worth more.
Mark, I wouldn't call one possibly-annoyed-sounding-in-the-original-Norwegian-but-losing-most-of-it-in-translation article an indication of a "deep seated" belief. To me it reads as they have a good grasp of the reality of the situation - a house is not an investment, it's a liability, not an asset and you must expect it to start depreciating as soon as you take possession.
B:there is no such grasp, and if there were, all policies are against it. The average house has increased 8.5 % in price nationally since april 2011.
B: looking at the figures presented would lead you to believe that house prices are falling, contrary to reality, in fact even in the middle areas, new built houses aren't falling in price one penny, they are appreciating. But in 25-30 years, todays new build will be the average house, and new builds will overtake the price with x percent. The fact that this is presented in a financial newspaper is disturbing and a witness to the lack grasp you ascribed it.
B, this was basically Kj's post and he knows what he is talking about. Checking the scale of Norway's house price (i.e. land price) bubble is not difficult - see update. I see little evidence of houses falling in value.
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