For members


How to analyse a Norwegian housing association’s finances before you buy an apartment

When you buy an apartment in Norway, you may actually be buying into a housing association (borettslag), and it is crucial to understand the state of the association's financial health before you purchase.

Pictured is the St Hanshaugen district of Oslo.
Here's what you need to know about a housing association's finances before you buy. Pictured is the St Hanshaugen district of Oslo. Photo by Roar Skotte on Unsplash

Many apartments in the big towns and cities across Norway belong to a cooperative housing structure, with an association being called a borettslag in Norwegian. When you buy into a housing association, you aren’t just getting a place to live – you are also buying a share of the borettslag.  

This is because these housing associations operate as their own legal entity, similar to how a limited company is also its own entity. 

An association will have its own operating costs, debts, a board and other shareholders. Therefore learning more about the finances involved will be vital if you are going to become a shareholder in an association. 

Being able to tell a well-run housing association with healthy finances from one in a more perilous position can make or break whether a home is for you. 

Normally, the sales documents for the property list the association’s accounts, along with the minutes from the latest general meeting (which may include info on planned renovations). If not, you can find accounts of the housing association you want to buy into with The Brønnøysund Register Centre.  

One of the most important things to consider when looking at an association’s finances is the fellesgjeld. This is the shared debt of the association. The joint debt can include the original building costs or any major renovations that have taken place in recent years. Instalments and interest on this debt are paid monthly. New builds will typically have a grace period before they are required to start paying down a sizeable joint debt. 

When you buy into an association, you also opt into the debt. You, as a shareholder, can also choose to pay down your share of the debt sooner. A higher debt will mean higher monthly costs. 

After that is the felleskostnader (communal/shared costs), these are paid monthly and cover municipal fees, porter and cleaner charges, building insurance, maintenance of the outdoor areas and exterior and the cost of energy in common areas. The monthly costs are paid on top of your mortgage and utility bills for your home. 

When you pay these costs, the money goes straight into the association’s bank account and acts as a form of income the borettslag depends on to cover its expenses. The board decides these costs based on the annual budget it formulates in the summer or autumn. 

These charges will be a combination of a flat rate for everyone for certain services (such as broadband) and residents paying proportionally for the size of their property. However, low joint costs can sometimes be a warning sign. 

Sometimes they are artificially pushed down by the board not being proactive with maintenance and repairs. This leads to higher costs in the future as it is more expensive to repair something after it has broken than maintain it. 

It can also mean that some of the services provided by other associations are not offered by the one you are considering becoming a shareholder of. This can mean significant one-off costs for the association (increasing the joint debt) or increased costs for you personally in the long run. 

Another factor is finding the goldilocks zone of profit and deficit or overskuddet and underskuddet in Norwegian. Neither should be too high. Super high debt can signal years of financial mismanagement and, as a result, higher shared debt and communal costs for you, the shareholder.

Too much profit, on the other hand, is a sign that the association is charging too much in costs or that it isn’t investing as much in the property. However, debt is okay if the association has major renovations underway. Disponible midler is another thing to keep an eye out for. Essentially, this is the amount of money the association has after paying bills, running costs and interest on loans. 

As mentioned above, housing associations will have joint debt. One key thing to check on the debt is whether the association is getting a competitive interest rate. A good interest rate means lower repayments and a proactive board invested in the association’s financial health. Experts advise that, as a rule of thumb, the interest rate shouldn’t be much higher than the one you have on your mortgage (unless you’ve got a terrible rate on your mortgage). 

Some outgoings of the association are also crucial. First up is insurance costs. You’ll likely need to ask the association for more specific information, but two coverage areas are vital. 

These are building insurance (which only protects the building, but not your possessions), and the second is coverage for if other shareholders are unable to share their foot of the bill. If there isn’t coverage for either of these, it could result in substantial costs for you. 

High legal fees should also present themselves as a red flag when looking at an association’s finances. Significant lawyer fees are a sign that the association is involved in a conflict of some sort. This can range from disputes with residents, local authorities, a lender or tradespeople that have carried out work on the premises. 

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For members


How long will the Norwegian krone remain weak? 

The Norwegian krone has been at its lowest value for three years. So how long will Norway's currency struggle against the dollar, the euro and the pound? 

How long will the Norwegian krone remain weak? 

Norway’s krone is down to most major currencies considerably since the turn of the year. Since the turn of the month, the drop-off has been even sharper. 

In immediate terms, this means less value for money when using the currency abroad, and in the longer term may mean higher inflation and interest rates. 

READ MORE: What does the weakened Norwegian krone mean for you?

There are a number of reasons for why the Norwegian krone has performed weakly, from Norway having a lower key policy interest rate than the US or the Eurozone, investors taking less risk, the central bank Norges Bank selling kroner and the krone falling with the stock market and oil prices. 

Some of the factors are also further compounded by Norway having a floating exchange rate. This means that Norges Bank doesn’t intervene in the market to try and support the currency. 

In contrast, some European countries have their domestic currencies tied to the euro. Norway’s Scandinavian neighbour Denmark is an example of this. Here, central banks intervene to ensure that the exchange rate of their domestic currency and the euro stays the same. This is referred to as a fixed exchange policy. 

READ MORE: What is making the Norwegian krone so weak?

Some of the factors behind the krone being weak also act as hints as to when the currency could begin a recovery. First up is interest rates. Norges Bank is expected to raise the key policy rate above its initial target of three percent due to the weak krone and higher inflation. 

Experts predict that the key policy rate could, in fact, be raised to between 3.5 and 3.75 percent. However, this would still leave the key interest rate below the US’s Federal Reserve interest rate, or federal funds rate, which is set at 4.75 percent. 

However, raising the key policy rate will help to make the krone a more attractive proposition for investors, with high-interest rates historically contributing to a strong krone. Norway’s next key policy rate announcement is pencilled for March 23rd. 

Furthermore, as the financial markets stabilise, so should the Norwegian stock market and the krone. And, if oil and gas prices rise, the krone should follow suit. 

Overall It can be hard to pin down when the situation could improve for the Norwegian krone. Nordea Markets expects the krone to stay weak all the way to the summer months. It said that due to the various factors involved, the krone’s recovery may not meet this time frame. 

Chief economist Elisabeth Holvik at Sparebank 1 also believes that the krone will continue to struggle in the short term. 

“There are no trends that point to the krone strengthening again. We are approaching the crisis levels from the pandemic, when the financial market in Norway was close to stopping had it not been for the US central bank creating a scheme for lending dollars to Norges Bank,” she told the business news outlet DN

Meanwhile, DNB writes that the krone will remain weak for as long as uncertainty over a potential banking crisis looms over financial markets worldwide. 

“We still think the krone can strengthen, but the market turmoil must probably subside first. As long as the risk of a banking crisis is uncomfortably high, it will probably help to limit the possibilities for krone strengthening in the future. But in the short term, we believe that oil prices will rise as the oil market tightens, and we aim for an oil price above 100 dollars a barrel this autumn,” DNB wrote in a report. 

Danske Bank Norway believes that the krone will rise in the more longer-term thanks to energy prices. 

“So, to summarise why the Norwegian krone is weak today, in the short term, it is due to a weak risk sentiment in 2022 and a falling interest rate differential between Norwegian and international interest rates. In the longer term, however, a secular trend with rising energy prices will gradually strengthen the krone,” it wrote in an analysis.