The housing market

“The housing market” is not a homogenous concept. It can be divided into two main segments – “city apartment blocks” and small houses outside the city centres. The small house segment has traditionally been more stable. There are several reasons for this. The fluctuations in prices for this type of house are relatively minor and there is very little impact from speculators and oversaturation. Most people will always have a housing requirement irrespective of economic cycles, as housing is governed by need based on family situation and life cycle, the general increase in population and house moving trends.

The “city apartment block” segment has a history of major fluctuations. A growth in prices over several years and easy access to financing have resulted in over-financing and significant elements of financially motivated house purchases and speculation. A major share of newly built homes has been purchased by investors – not to live there but to make money on selling the property on. The segment hardest hit by the correction in the housing market in 2008 was, as expected, the "city apartment block" segment.

Market situation

After several years of falling house sales culminating in the financial crisis and the virtual stop in sales at the end of 2008, the situation changed in 2009. We witnessed a clear increase in the number of potential customers at viewings and a higher demand for our products. With effect from the second quarter of 2009, both the Norwegian and Swedish businesses could report an increase in sales.

Family homes at reasonable prices are in demand, irrespective of economic cycles, as they are motivated by a genuine need for housing. There are three significant factors for positive developments in sales: Access to financing at a reasonable interest rate level, a well-functioning housing market and a stable level of unemployment. The interest rate to date in 2009 has been at an historical low both in Norway and in Sweden, and is expected to remain low in 2010. Unemployment has been at a low level in Norway in 2009 but is close to 10% in Sweden. The situation in Sweden appears to be stabilising towards a lower level in 2010.

In 2009, the population increase in Norway was almost 60,000, with an increase in Sweden of over 84,000. This has been the trend over the past three years. A similar increase in population is expected in 2010. There is also an increasing demand for replacements for homes which have to be renovated. In total, the above indicates an annual requirement over a 5-year horizon of 30,000 to 40,000 newly built homes if we are to prevent housing prices increasing at a rate higher than other prices.

Registered starts and order backlog on the housing market have seen a decline both in Norway and Sweden since 2007, while the population continues to increase and large groups of young people are ready to buy their first home. An improvement is expected in 2010 but the volume increase is not expected until 2011 as it takes time for the major companies to realise new housing projects. The growth in house building can also be obstructed by the length of time it takes the municipalities to process building applications and the lack of plots of land developed for housing. A significant share of the general price increase on the housing market can be attributed to an imbalance between the increasing requirement for new homes and a low rate of house building. This situation is expected to continue in to 2011.

Norway

In 2009, a total of 19,669 registered starts for new homes was recorded in Norway (actual registered starts in accordance with Prognosesenteret, Norway, an analysis company for the construction market). This is a decline of 2% in relation to 2008 when there were 20,000 registered starts. The decline in registered starts was most notable within the “city apartment block” segment, totalling 17%, while the small house segment (detached, linked and terraced houses) remained more stable. The number of registered starts for small houses in 2009 was around 13,860. Of the total housing stock in Norway of close to 2.3 million houses, the small house segment represents around 70%.

 10 largest players in Norway

Sweden

Registered starts in Sweden in 2009 totalled 15,589 new homes (actual registered starts in accordance with Prognoscentret, Sweden - an analysis company for the construction market). This is a decline of 29% in relation to 2008 when there were 21,900 registered starts. The decline in registered starts is distributed between both the "city apartment block" segment and the small house segment (detached, link and terraced houses). The number of registered starts for small houses in 2009 was 6,445. Small houses represent around 45% of the total Swedish housing stock of 4.5 million houses.

10 largest players of the single family homes market segment in Sweden

Myresjöhus and SmålandsVillan had a combined market share of approx. 4.5% of the total number of registered starts in Sweden in 2009. Compared with the other companies on the Swedish small house market, Myresjöhus and SmålandsVillan together were the largest providers in 2009 with a market share of 10.8% of approved building permits.