This property would have dubbed in value every five years on average without generating any taxes. If you were business savvy and rented it out, you would have done a refinancing of the property every few years.
And you could have had this one apartment as your sole source of income for the entire period.
The value of the Norwegian real estate portfolio is increasing on average 5-10% yearly.
Just after the “big crash” in 1986, around 88-91 an immense hike in prices of Norwegian real estate started. And although there has been som downturns and dips, most notably in 2003 and 2008, the prices have gone up.
If you as an investor had put your money in an average three-bed apartment around 80 sm^2 in Oslo in 1992. It would have set you back about 100 000 NOK. Given regular inflation and such, it should be valued around 3-400 000 NOK today. In reality, you would have to pay between 4 and 5 0000 000 NOK for that apartment today.
At some point, the growth will decline. If for no other reason than a reduction in demand, increase in unemployment, local recession, politics or economic development.
But for now, there is no decrease in demand, an increase in unemployment or other factor pointing towards stagnation in prices.
Hence in the foreseeable future prices will at least be stale and thus a safe investment.
Risks related to investing in real estate in Norway, are almost nonexistent.
First and foremost because there are really strict development regulations in Norway. Which in turn makes it easy and relatively cheap to insure, both for developer and buyer.
There is another set of regulations related to refurbishment, regulating who can do what, what to do, how to certify it and how to document it. Which in turn makes buying and selling the property relatively risk-free for both parties.
Because of strict regulations, financing is quite easy. Meaning as long as you do everything by the book. As in following all requirements, checking all of your lists and ensuring you are compliant. Banks will give you the credit necessary to do almost whichever transaction you want.
There are obviously areas which can be difficult to develop. There are strict regulations on developing areas set aside for agriculture. And there are quite a few complications regarding regulations when it comes to old buildings.
Although there are some difficulties to consider when looking for property to development. In general most of these “problems” can be found out before any transaction is done. Hence be prepared and play by the book will ensure it works out.
Norwegian real estate are exempt from almost all taxation
Investing in Real Estate in Norway is favorable first and foremost because it is and has been an official policy that everyone should be able to own their own home, hence taxation on a property is almost nonexistent.
In recent years, some taxation has been put in place, but capped at 0.04% and compared to average taxation on other 0.5% that is an absolute steal given how the prices have skyrocketed.
Right now thee government wants to abolish real estate taxation as a whole, however, this proves to be quite difficult. And the most probable outcome is that within a few years a maximum rate will be implemented nationally. It is however unlikely that it will be any higher than 0.04% because that would be devastating for most private economies.
Although there is some uncertainty about taxation these days. The implication on most family’s private economy would be devastating if high taxes were introduced. Hence there will be taxes, but barely noticeable
Norway is at risk for a recession
Prediction politics in today’s society is guesswork at best. But there is a “green” wind blowing over Europe right now and at least for now it seems green politicians, in general, has a tendency to lean leftward for support. Hence there is a fair chance Norway can be drawn in a more politically socialist direction.
Norway is still heavily dependent on the production of oil. In the long run, this is not a nice place to be. First and foremost because Norway does not really have any other business sectors able to compensate for the eventual massive downfall in income. And there has not been any significant investing done to try to solve the eventual downfall either.
Insufficient investment in public infrastructure is starting to be a major. Roads, railroads and public buildings have been in decay more or less the last 40-60 years. And the Norwegian wealth fund would hardly cover the expenses to get everything “back on track.” Where it needs to be the day the income from oil is gone, and Norway actually has to start competing in the real world again.
Although there is a sign pointing towards a somewhat grimmer future. It will most likely not occur. If for no other reason that there is still more than enough time and resources to counter eventual problems