Norway

Overall construction activity

The Norwegian economy experienced weak growth in 2023, mainly due to a restrictive monetary policy. Inflation has shown a downward trend in recent months. The central bank has signalled that the first interest rate cut is most likely in the last quarter of 2024. Statistics Norway expects modest growth in mainland GDP of 0.9% this year and 1.6% in 2025, which is below trend growth in both years. The labour market is less tight and unemployment is expected to rise slightly. Inflation is forecast to decline gradually during the year, but will remain above the 2% target. The Norwegian currency is historically weak and the central bank may have to postpone interest rate cuts to strengthen the NOK in the face of rising imported inflation.

Both building production and total construction output are estimated to have fallen by 8 % and 6 % respectively in 2023, measured in constant prices. Forecasts for 2024 point to a further decline of 5 % in building production and 3 % in total construction. Even with interest rate cuts towards the end of the year, interest rates will remain high, reducing demand in the construction market this year. It is primarily new residential construction that will contribute to a sharp contraction in the construction market this year in terms of production value. The R&M market is expected to show slightly positive growth this year, with R&M non-residential construction showing the strongest increase in production value, partly due to energy efficiency requirements. On the supply side, we do not expect construction cost indices to fall during the forecast period.

Housebuilding

Registered housing starts ended in 2022 with 22 831 dwellings. It should be noted, however, that registered starts in Norway are equivalent to a permit to start (which lasts for three years). There is no information on whether the permit actually led to a physical start, but we have credible evidence that the deviation in 2023 was significantly higher than in a normal year. We estimate that actual physical starts fell by 33% in 2023. 

New home sales were weak throughout 2023, falling by 45% year-on-year. Interest rate hikes and high consumer price inflation continue to reduce households' disposable income, which in turn weakens their purchasing power in the housing market. We expect sales to stabilise at a low level until the first half of 2024, before picking up in the second half of the year following the first interest rate cut. The forecast for 2024 shows growth of 6% on last year's registered starts, which equates to 21,000 housing starts. This is still a very low level compared with the past decade. The residential construction sector also includes holiday homes and garages, which are closely linked to housing production. 

The Norwegian residential construction market is estimated to have declined by around 1% in constant prices in 2023. Only the maintenance segment will grow, while both renovation and housing remodelling will decline. A slight decline of 0.3 % in total residential R&M is expected this year, before picking up in the following years.

Non-residential construction

Non-residential building starts in 2023 were 2.89 million square metres (excluding primary industry), 25% lower than the previous year. This sharp decline should be seen against the high levels of 2022, which was a record year for non-residential building starts. The forecast shows non-residential construction starts of 3.3 million square metres in 2024, an increase of 14% on the previous year. This is entirely due to an increase in public construction starts, explained by the start of the hospitals in Oslo this year (300,000 m2 in total).

The decline in non-residential construction in 2023 is estimated at 1.9% in constant prices. High interest rates combined with higher labour and rental costs have had a negative impact on investment and demand for R&M work. We expect positive growth of 1.5% this year and a further 2.5% in 2025. The strongest percentage growth is expected for R&M work on public office and administration buildings.