There's a house for sale in my old neighbourhood in Asker, Norway. The house is pretty much identical to the one I sold back in January 2017, and their asking price is 5.45 million NOK. That's up from the 4.70 million that I got for my house.
This means that the current price for my old house is up about 0.75 million NOK over the six years since I sold it. However, the NOK is down by about 50% against gold over the same period. One gram of gold was a little above 300 NOK back in 2017, and is now a little above 600 NOK.
In terms of gold, house prices in Norway are down by about 40%. My house was sold for the equivalent of almost 16 kg of gold in 2017 while a similar house sells for less than 10 kg today. I'm better off by 6 kg of gold for having sold my house back in 2017 rather than now. If we add the cost of owning a house due to taxes and fees we have to add at least one more kg of gold. The difference between owning gold over those six years relative to owning my old house in Asker is a staggering 7 kg of gold.
This illustrates the deceptive nature of nominal prices measured in fiat currencies. What looks like a decent return is in fact a sizeable loss. However, as I pointed out in this post from September last year, the size of the loss depends on the extent to which the owner used bank credit to pay for the house. If the owner was fully loaded up with debt at a low interest rate, that person would see little to no loss. It's those who finance their purchases debt free that suffer the full loss when bubbles burst, because only they had the means to own gold rather than a house. Their loss is the gold that they could have had instead of the house.
Measured in gold, house prices in Norway are on their way down. However, 10 kg for a small house in Asker is still a bubble. As pointed out in this post, also from September 2022, 2 to 5 kg of gold is a fair price range for modest houses.
To illustrate, here are the historic prices of my wife's apartment in Porto:
- 2005 - 12.7 kg
- 2014 - 2.2 kg
- 2017 - 3.3 kg (estimate)
- 2022 - 4.4 kg (estimate)
Similarly for Asker, I now have the following numbers:
- 2004 - 14 kg
- 2017 - 16 kg
- 2022 - 12 kg (estimate)
- 2023 - 10 kg
House prices in Norway, measured in gold, appear to be cratering.
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| Reflection in a soap bubble |
By Brocken Inaglory. The image was edited by user:Alvesgaspar - Own work, CC BY-SA 3.0, Link
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