Annual Report 2022

2022 was a good year for Selvaag Bolig in terms of results and earnings, despite a challenging market. Good profitability in the projects, new land plots in major metropolitan areas and housing for NOK 6.4 billion under construction at the end of the year make the company well positioned for the future.

Activity is high in Selvaag Bolig. At the end of the year, we had 1 253 houses under construction and 67% of these were already sold. Sold homes are only recognised as income when they are delivered. We thus have a solid order reserve which ensures revenues upon completion in 2023 and 2024.

In 2022, the market for new housing has been severely affected by both the war in Ukraine and aftereffects of the Covid-19 pandemic. The first quarter was good, but the housing market changed after the outbreak of war in February. We succeeded, however, in starting nearly as many units as we completed during the year.

Although the most fundamental conditions for housing and urban developers are in place, with population growth, urbanisation and large housing requirements, there has been a significant decline in sales of new housing after the summer. The challenge has been two-fold. On the one hand, rising mortgage interest rates, uncertainty about where interest rates will end up and the higher cost of living has reduced purchasing power and the willingness to invest. On the other hand, the supply of new housing has declined because of higher material prices and construction costs. In very much of 2022 it was not financially responsible to start sales of new projects in many places. For projects already under construction, our costs are fixed. They are thus not influenced by higher costs.

The situation we are experiencing now is not unique. Similar circumstances have arisen many times during Selvaag’s history. Therefore we have both the experience and resources which allow us to handle situations like this and emerge stronger after what many describe as turbulent times. Selvaag became known in the post-war period for being a part of the solution to the housing challenges of that time. In the autumn of 2023 it will be 75 years since Selvaag built its first house in Ekeberg, Oslo. The vision at the time was to create something new and better in a market with a major shortage of housing and high material prices. With the house at Ekeberg, Selvaag demonstrated that it was possible to build at one-third of the price in one-third of the time. This contributed to the country's housing production almost tripling, and to the company's growth adventure.

We have thus gained considerable experience to participate in, and adjust and adapt to this cyclical market, in order to minimise risk and take advantage of the potential that the fluctuations offer. The company's business model and adaptable organisation ensure that we can capitalise on good markets and quickly adapt to quiet markets. Our formula for success since Selvaag Bolig started as a separate company is to be lightly staffed, have few unsold completed homes, only start selling new projects when the market is ready, and use our time actively to both secure new development properties and to prepare new projects for sale. We are sure that predictability will return to the market and demand for new homes will return. We are ready for that. We have several hundred homes for sale now, and many new projects where we start selling during the year when the market allows.

The fundamental prerequisites for a stable and good new housing market going forward are good in all the regions where we are developing housing. The background for this is urbanisation, population growth and a large requirement for housing. The supply deficit in the Oslo area, our largest market, will increase now that very few projects are being released for sale. New projects are not being put on the market in the other large cities either, which will lead to a supply deficit there as well. This probably means that house prices will remain at a high level, and that we will see a price increase when the market normalises. The metropolitan areas, where we already are a major player, will therefore remain our main focus going forward.

One thing we are confident will change is the way people want to live and the foundation that political guidelines provide for how we can live in the future. There are increasingly strict regulatory requirements for design, participation and sustainability. In addition, we find that customers want homes that are socially sustainable and facilitate a simpler everyday life. The answer to much of this is Selvaag Pluss. Since 2004, we have built around 2 000 Pluss homes, which are a lifestyle concept where the residents have access to shared facilities and services. Evaluation of the concept shows that it contributes to an increased quality of life, that residents experience less loneliness and that the elderly stay longer in their own home. The concept is increasingly sought after by both home buyers and municipalities, and will therefore form a larger part of Selvaag Bolig's offering in the future. We now have around 3 000 such homes under development in new projects, and are also actively working on further development of the concept so that it becomes available to more people, both in existing and new development areas.

Our other ESG efforts have continued in full force in 2022. The goal for these efforts is to give us a competitive advantage. We therefore work purposefully to reduce negative impacts and make a positive contribution wherever possible. A prerequisite for achieving this is to control our data, so that we have a good basis for defining our level of ambition and setting clear targets for, among other things, emission reductions. We have therefore implemented climate accounting for all projects completed in 2022 and have chosen to digitise all the non-financial data we acquire, starting from 2023. The requirements we set for climate accounting follow the new requirements in the building technical regulations, which will apply to projects where we apply for planning permission after 1 January 2023, and we have now defined clear targets, among other things, for greenhouse gas reductions. We have also changed existing routines and now set requirements for the entire supply chain both in terms of climate and human rights, in line with the Norwegian Transparency Act.

During 2022, we also strengthened our presence in Stockholm, among other things through further development of the organisation and agreements on several new sites. Our Pluss homes, which are homes with shared facilities and services, have been a key element in the success of the investment in Sweden, as the municipalities are the sellers of the plots and have asked for this concept.

As CEO, I am confident that we have the recipe for success and the ability to follow it. We have experienced and skilled employees, high employee and customer satisfaction, a solid business model, access to attractive plots of land for almost 11 000 homes, and products that are in great demand.

Buying a home is the most important investment most of us make in our lifetime. We will contribute to more people having the opportunity to do just that. Our 75-year presence in the market and solid finances make Selvaag Bolig projects and homes attractive and safe investment properties. For buyers, this provides extra protection, and it makes buying a home from Selvaag Bolig a safe and sound investment. This also benefits our owners. Long-term ownership in Selvaag Bolig should be rewarding.

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