Since the middle of 2021, sales of new homes have fallen, and now Norway’s largest homebuilder has found itself in a tight spot: Last year, Obo started construction of over 4,500 homes, but only 2,700 were sold. – Usually that number tends to be quite similar, says CEO Daniel K. Siraj in Obos. In total, Obos has around 2,000 unsold homes that are under construction. The stock of unsold homes has piled up to NOK 14 billion, according to Siraj. – These are very large numbers. We also have to think about the total risk management in relation to how much we can read on, says Siraj. Putting housing construction on hold In the future, Obos will therefore wait to build more housing. This applies, among other things, to Kløfta, Ammerud and Furuseth in the Oslo area. In addition, projects in Bergen and Sweden are being put on hold. – The trend is the same everywhere. There is no match between what it costs to build and what it is possible to sell homes for in today’s market, says Siraj. PUT ON HOLD: Building O was to be built in the Grorud district of Oslo with approximately 150 apartments. The project was supposed to be environmentally friendly, but Obos can’t make the math work out and wants to wait until 2024. Photo: Code/Bezier / OBOS Nye Hjem Obos has until this year chosen to keep up the pace in housing construction, even though they have so far only sold out 20 per cent of, for example, the Ulven project in Oslo. Most house builders have to sell around 60 percent of their projects to get the green light from the bank to put the shovel in the ground. However, Obos has 52.6 billion in real equity. But now Siraj believes that the speed must be slowed down. – We are willing to use much of the equity capital in Obos to build in both good and bad times, but right now we feel that the pain threshold has been reached, he says. – But housing is needed in Oslo, isn’t it? – We will continue to build that. Therefore, we continue to look at how we can reduce costs to a lower level. We don’t know now what people will be able to pay in the future. We have to sell homes people can afford to buy, says Siraj. STRUGGLING WITH SALES: The Ulven project in Oslo has sold 20 percent of the homes, but Obos is in full swing with construction. Photo: Jon P Petrusson / news / Jon Petrusson Do you think the market will be back next year – How much do construction costs have to go down for these projects to get back on track? – It is very variable. In some places the costs have to be reduced very much, in others it only needs a little more, he says. – How will this affect the suppliers? – It’s clear that if we don’t get started, it will affect whoever is producing wooden panels at Moelv. – How long will this last? – We hope it will lighten up after the summer holidays. But we don’t think we will be in full swing again until 2024, says Siraj. Economist questions housing shortage When the housing market in the Oslo area in particular was hot, developers talked about a housing shortage. – Then it is a cross of thought that there are many new homes that are available, and which are not sold, says chief economist Harald Magnus Andreassen at Sparebank 1 Markets. He points to several reasons for the brake. The interest is more expensive and construction costs have increased far more than normal. Since the financial crisis, rents in the biggest cities have barely risen, adjusted for the rise in prices elsewhere in society. But house prices have skyrocketed. – There has been a perceived lack of housing. If there had been a real housing shortage, rents would clearly have risen more than they have. It is house prices that have risen because interest rates have been low in relation to what people have thought about their incomes. – The interest rate works Andreassen believes that the upswing in the housing market meant that the developers paid too much for the plots and contractors, seen from today’s eyes. He thinks the prices may have to be adjusted down by 10 to 15 per cent in order to sell off the stocks. – Now the calculations have to be done all over again. It is a painful process for the contractors, who have less to do and which is part of the brake on the Norwegian economy. Another thing is the builders. It is almost guaranteed that the projects will have to be sold at a lower profit or loss, says Andreassen. BELIEVES PRICE FALLS WILL BE NECESSARY: Chief Economist Harald Magnus Andreassen at Sparebank1 Markets believes that builders must lower the price of new homes to attract buyers again. Photo: news After the economy shifted to high inflation, and Norges Bank initiated a horse cure with higher interest rates to reduce demand in the economy, the housing industry was quickly hit. – They fluctuate much more than the rest of the economy. As of today, there has not been a decline in the construction business, but the entire value chain from architects to roofers sees that demand is dampened because someone wants to dampen growth. – Is this an example of the interest rate working? – Yes. This is an example of the interest rate working exactly as it usually does. It does that this time too, says Andreassen.
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Obos has unsold homes for 14 billion – news Norway – Overview of news from various parts of the country
