Annual report 2023

Selvaag Bolig delivered satisfactory sales and results in 2023, despite challenging market conditions throughout the year. Several successful sales and construction starts contributed to us having NOK 4.5 billion in homes under construction.

The fundamental conditions for housing and urban development are favourable. Population growth, urbanisation, and a significant demand for housing in the major cities are the key drivers of growth. However, a negative shift in the new housing market emerged after the summer of 2022, persisting into 2023. Although the interest in new homes remained strong, home buyers became more cautious. Rising interest rates, increased living costs, and banks' more restrictive approach to financing significantly affected both the desire and ability to purchase new homes. Additionally, high construction costs and the flat price development for housing during the same period led developers to postpone projects due to unsatisfactory profitability. In 2023, we witnessed the lowest number of housing starts since the banking crisis in the late 80s. The market situation has also impacted Selvaag Bolig. In 2023, we sold fewer homes, had fewer sales and construction starts than in previous years, and now have fewer homes under construction than before.

Ambitious strategy and a solid portfolio
The housing market is cyclical, and the current situation is not unique. Similar situations have arisen several times during Selvaag’s 75-year history. Our experience, combined with our expertise and resources, makes us able to handle demanding periods. We have successfully signed new land plot agreements in Bergen and Stockholm, continued to develop projects and we have been actively marketing and selling our homes, even if the market has been sluggish. We are among the few builders who started selling new projects in 2023, contributing significantly to satisfactory year-end sales figures. We ended up selling 435 homes (360 net) and started construction of 362 (275 net). Our order backlog is still solid, in a period where forecasts show that we are approaching the end of the current demanding market situation.

In 2024, we should start sales of new projects in Oslo, Fredrikstad and Bergen, in addition to new stages of existing projects. Future launches of Fornebu and Bjerke, two of our most important and largest projects, are anticipated in a couple of years, showcasing a robust project portfolio that few competitors can match.

Key elements of Selvaag Bolig’s business strategy is the lean and adaptable organisation, so that we can both benefit maximally when the market is growing while being able to quickly adjust to quieter periods. We build large projects in metropolitan areas where housing needs are greatest. We reduce risk and create values in all phases of the project, from purchasing land plots to planning permission and delivering completed homes. That has been an excellent formula for success. The projects have had good profitability, and even though the order backlog is lower than at the end of earlier years, we believe the company is well positioned for the future. We have good products, are excellent at housing concepts, with access to land plots for 11 000 homes, and most importantly – people want to buy our homes.

Signs of a better market
There are good underlying conditions for a better new home market in all the areas where we are present. That is especially true in Greater Oslo, our biggest market, where the market situation has contributed to an increased shortage of new homes. In several of the other cities we operate in, enough new projects aren’t being launched. That makes those cities more like Oslo, with an increasing housing shortage. Our analysis indicates that this situation will keep housing prices at a high level, and that prices will increase when the market normalises. Macroeconomic reports predict that the price growth between 2023 and 2026 will be 15.6 per cent in Oslo and 10.6 per cent for the whole country. Therefore we will continue to have our main focus on the large metropolitan areas where we are already a major player. At the end of 2023 we have seen signs that the market is improving. Our own sales in the fourth quarter were significantly better than in the same period of 2022, and the interest rate trajectory indicates cuts this year and the following two years. In addition, construction costs have stabilised at a level that makes it possible to start more new projects. We are ready to meet housing needs with about 400 homes for sale and more sales starts in 2024.

Housing preferences are changing
Along with the expected growth, we are experiencing that people’s housing preferences and the political framework for housing development are changing. We are continually working on product and concept development in all our projects to adapt to this. New housing development must satisfy more interests and requirements than before, including stricter requirements for climate and the environment, social housing models and living forms that facilitate a simpler life for people of all ages and life situations.

Our primary answer to this is the lifestyle concept Selvaag Pluss which we have developed with more than 2 000 homes spread across 15 projects since 2004. Pluss residents have, in addition to their own home, access to hosting, common areas, services and activities. Both customer satisfaction surveys and evaluations of the concept confirm that these residents are more satisfied than residents of ordinary housing projects. They experience better quality of life, less loneliness, and elderly residents stay longer in their own homes. Interest in the concept is increasing from both home buyers and municipalities. Thus Selvaag Pluss is steadily becoming a larger part of our product offering. We now have about 3 000 such homes under development in our new projects. At the same time, there is a continuous development of the concept, both when it comes to the service offering and for the flats themselves, making it accessible for more people, both in existing and new development areas. An example of this is the compact flat concept Selvaag City, which is based on Selvaag Pluss, but has more small flats with lower unit prices. Selvaag Pluss is a good example of a good and long-term work with social sustainability.

Increased environmental efforts
Our other ESG efforts continued unabated in 2023. Our goal is that the ESG work will give us a competitive advantage. We are working with a full focus on reducing negative impacts on climate and the environment, and contributing in a positive manner whenever possible. In addition, we are strengthening our efforts to ensure good social conditions in our entire value chain. One prerequisite to achieve this is that we have good routines, management systems and access to correct data. We have a solid basis in data in all our projects and we have defined our level of ambition when it comes to reducing carbon emissions.

We conduct a carbon footprint assessment for all our projects, and check that all our large suppliers have decent working conditions and human rights. Our carbon footprint assessment follows the new requirements in the building code. As part of our ESG work we have changed our routines and require our entire supplier chain to meet requirements regarding both climate and human rights. The sustainability information in this annual report follows the Global Reporting Initiative (GRI), and follows the same principles as the annual report for 2022. Going forward, we will, however, make changes in our reporting to ensure that 2025 is aligned with the new EU regulation CSRD and the reporting standard ESRS. To meet ever-evolving and stricter requirements, our strength lies in our solidity and experience, allowing us to quickly adapt to new frameworks while ensuring our own economic sustainability.

Satisfied customers, colleagues and good profitability
At the same time as a home purchase from Selvaag Bolig is a safe and good investment, another important parameter for success is that we have satisfied customers and employees. We are thus very pleased to see that this year’s customer satisfaction survey showed high satisfaction. Our employees greatly enjoy their jobs, despite the challenging times. Selvaag Bolig made it through the year without significant changes in the number of employees, and the year’s employee satisfaction survey “Great Place to Work” showed that Selvaag Bolig is one of Norway’s best places to work. I believe that one of the main reasons for this is our ownership structure that pushes us to do something extra. We have share programmes which stimulate to broad and long-term ownership, and give all the employees the opportunity to participate directly in the company’s value creation. Around 70 per cent of us, in total 58 employees, are now shareholders in Selvaag Bolig. During the year, 36 employees purchased shares, and all in all, we own shares valued at nearly NOK 85 million. So far that has been not only been profitable for the participating colleagues, but has without a doubt also strengthened engagement and loyalty.

I believe that a company that is both competent and profitable, with satisfied colleagues, will deliver good returns in both good and difficult times. In 2023, shareholder returns (Total Swap Return) were 12.6%, which we are very satisfied with in today’s market. Long-term ownership in Selvaag Bolig has been profitable. Our goal is that is should still be profitable to invest in our company, be an owner of a Selvaag Bolig home, and be a colleague in our organisation. We are looking forward to continuing our journey.

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