Tanzanian Association Oslo

Housing prices tumble,

but home loans

harder to get

Prospective home buyers are suddenly able to snap up properties at prices below appraisals in Oslo. At the same time, however, banks are finally cracking down and setting higher lending standards. Some borrowers are being told they must be able to tolerate interest rates of more than 11 percent.

There are still lots of properties on the market, but they're getting harder to sell and finance. PHOTO: JARL FR ERICHSEN/SCANPIX

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Record low interest rates in recent years, coupled with a booming economy pumped up by high oil prices, set off a housing boom in Norway that now appears to be quickly going bust as the financial crisis that started in the US spreads across the Atlantic.

Construction of new housing projects has all but stopped, the real estate market has slowed to a trickle and sellers have had to lower their expectations and their asking prices.

Fresh statistics prepared for Norway's national real estate brokers’ association (NEF) and released on Wednesday show an average 1.7 percent price decline last month.

Some sellers are even selling below appraisal to unload properties, much like what happened after Norway's last finance crisis in the early 1990s.

Newspaper Dagens Næringsliv reported on Wednesday that two out of three homes purchased in September went for prices that were under the so-calledtakst attached to properties by professional appraisers.

Norwegian banks, however, aren't making it easy anymore for homebuyers to obtain mortgages. After years of robust lending, with some banks even allowing borrowers to finance 100 percent of the purchase price of new homes, they suddenly seem much more cautious.

Fokus Bank now requires new borrowers to prove they have the cash flow necessary to make payments even if mortgage rates hit 11 percent or more, reports newspaper Aftenposten. Sandnes Sparebank is turning down first-time home loan applications, while Sparebanken Vest won't offer mortgages to customers unless they already have sold their existing home.

Norway's banks went through a crisis of their own in the early 1990s, and most promised tougher lending requirements. When the national economy started soaring about four years ago, however, many seemed to forget the lessons of the past and lent relatively freely. Now, with credit markets drying up internationally and large banks failing both in the US and Europe, they're clearly nervous again.

Norway's central bank opted against raising rates last week and has been trying to maintain liquidity in local markets. Interbank lending rates, however, have soared during the past month and most expect mortgage rates will rise as well.

Aftenposten English Web Desk
Nina Berglund