5 Reasons to Look to Norway

Despite the falling oil prices and decrease in office rents, the commercial real estate transaction market has been booming this year. Foreign investment into Norwegian real estate has been increasing rapidly in 2015, counting 50 percent of the total market volume. What key features attract foreign investors?

1. Demographics

Second only to Luxembourg, Norway is expected to see the strongest population growth in Europe towards 2020, and Oslo is expected to be the fastest growing capital in Europe.

2. Strong fiscal position

All state revenues from the petroleum sector are transferred to a sovereign wealth fund, which invests globally in equities, fixed income and real estate. The fund is currently the largest of its kind, with a market value of approximately $850 billion, or $165,000 for every Norwegian citizen. The government has a fiscal spending rule limiting the use of oil revenues to the expected real return of the fund, which is set to 4% annually. Hence, the break even oil price for the Government budget is actually zero.
Over the last few years the annual spending has consistently been lower than the threshold, using only 2.8 percent in 2014 and 3 percent in 2015.
In addition to the fiscal flexibility, Norway also has the opportunity to stimulate the economy by using monetary policy. The key policy rate is 0.75 percent today. Approximately 8 out of every 10 households in Norway own their own homes, with a high proportion of free floating interest rates, making the key policy rate an effective tool to stimulate the economy.

3. Stable and business friendly environment

Norway’s merits on international rankings:

• The lest vulnerable country on the Economist’s Political Instability Index
• 1st on the UN’s Human Development Index
• 2nd highest GDP pr. capita in the world
• 6th highest purchasing power adjusted GDP pr. capita
• 5th least corrupt country, according to Transparency International
• 6th easiest country to do business in, according to the World Bank

4. Low unemployment rate and solid long term growth prospects

Due to the oil price decline, the Norwegian economy is expected to experience below trend growth in 2015 and 2016. However, consensus among Norwegian macroeconomists is that the growth will normalize in 2017 and 2018.
The unemployment rate of Norway has been increasing slightly over the past year due to the effects of lower oil prices. However, the level is still low compared to most European countries, and the rate is expected to level out in 2016 and decline in 2017.

5. Depreciating currency working against effects of lower oil price

The Norwegian Krone (NOK) has depreciated heavily versus the USD and EUR over the last 12 months. This eases the impact of the oil price decline as it boosts the profitability of export- and import-competing firms.