The reduction in Norges Bank’s key rate through 2003 and into 2004 resulted in low interest rates. Low interest rates have contributed to a relatively sharp rise in household demand throughout this upturn. At the same time, solid growth in other countries has generated increased demand for many Norwegian export goods, resulting in high prices. Petroleum sector fixed investment has increased strongly, resulting in growing demand for goods and services supplied by mainland enterprises. Mainland fixed investment has also picked up. Commercial property markets After several years of fairly low activity, the number of commercial building starts is now increasing nationwide, including in Hordaland, where growth in this industry is solid. Through last year and so far this year, building activity has been particularly high in the retail trade sector. Commercial building starts have more than tripled since the trough in 2003. These developments are reflected in the lending figures. Through 2004 and 2005, banks’ and mortgage companies’ lending to enterprises in property management and services, and the retail trade and hotel and restaurant sectors increased markedly. In the first quarter of this year, total lending to these sectors was NOK 440 billion, an increase of close to NOK 73 billion compared with the same quarter last year. The value of shop premises has risen more than the value of office premises since the mid-1990s, and more in line with the rise in the housing market. Developments in the value of office premises in Norway have tracked developments in a number of other European countries.

House sales totalled NOK 44 billion, twice the total for the previous year. Syndication companies and property funds account for almost half of total sales. In Sweden, the share of foreign investors has been relatively high, and rising, for several years. In comparison, foreign ownership in the Norwegian property market is modest, but probably increasing. For example, the German property fund DIFA purchased parts of the Norwegian School of Management’s college premises in Nydalen in Oslo, and the Scottish Kenmore Property Group has purchased commercial property in Norway for more than NOK 1.4 billion. In a comparison of property markets conducted in 2004, Norway was classified as “highly transparent”. 1 Increased liquidity and transparency promote foreign interest in Norwegian property. 1  2  Jones Lang LaSalle, Global Real Estate Transparency Index 2004. BIS Review 41/2006  The economic situation The mainland economy expanded by 3.7 per cent in 2005. Growth in private services, construction and electricity production was strong. So far, a substantial share of output growth has been attributable to a sharp rise in person-hours worked. The fall in sickness absence in 2004 provided an additional supply of labour to enterprises, but sickness absence increased through 2005. Wage developments reflect and influence business cycles. Strong employment growth in the 1990s resulted in a rise in labour costs, which in turn had a dampening impact on growth. Moderate wage growth in recent years is being accompanied by a strong cyclical upturn. The labour market continues to tighten.