Immigration and House Prices in Norway

Abstract

During the past decades, many developed countries including Norway have experienced a remarkable rise in both house prices and immigration inflows. Extant studies have aimed to shed light on how immigration inflows affect housing prices. Given the large weight that housing consumption has on the household budget, the immigration’s impact on housing prices could be an important matter (Sá, 2011). This thesis studies the short term and long term effect of immigration on house prices in Norway’s largest cities from 1986 to 2012. I find that immigration has had a significantly positive effect on house prices. An immigration inflow equal to 1% of a city’s total population is coincident with an increase in housing prices of about 2,9%. These results are consistent with the findings of previous studies. My findings indicate that on average, immigration contributes to nearly one fifth of the total increase of housing prices in Norway. I did not find evidence that the short term effect of immigration on house prices has been greater than the long term effect, although economic theory suggests that the short term effect should be greater than the long term effect since in the long run the supply of housing will adapt to the demand.