Oslo housing market, a bubble?

Abstract

The housing market in Oslo has experienced high price growth the recent years. House prices have risen nationwide but the price growth in Oslo has been exceptional. Several people have pointed out that it is an unhealthy development and believe that we can expect a decline in the price level in the future.

In this thesis we wish to find out whether the high rise in house prices can be explained by fundamental factors or if there is a housing bubble in the Oslo housing market. We have addressed the problem using empirical data and analytical assessment of movements in the housing market in Oslo. We start out by looking at Himmelberg et al.’s formula for imputed rent and solving for expected capital gain. Furthermore we perform a cointergration analysis with two different models.

In neither of the analysis have we found any strong indications of a housing bubble or bubble trends in the Oslo housing market.