THE MORTGAGE SOCIETY of Finland (Hypo) has revealed it expects the coronavirus pandemic to temporarily dent house prices by up to five per cent, as long as the so-called return to normal continues without any setbacks.
Because house prices increased at the beginning of the year, the yearly drop in prices is estimated to settle at around 0.5 per cent in the capital region and 2.0 per cent in the entire country.
Hypo on Thursday wrote in its regular review of the house market that the number of transactions is likely to have decreased by more than a third between April and May. Preliminary data suggests that last month the decrease was as drastic as 40 per cent compared to February.
Over 160,000 currently temporarily laid off
It pointed out that a drop in the number of transactions typically results first in an increase in sale times and only then in a fall in prices due to the slow response of sellers: asking prices are not slashed immediately, but sellers will align their ideas of acceptable prices gradually with the payment ability and readiness of buyers.
“A drop in prices can be expected in the summer. With some luck, the virus has been brought under control relatively well and the housing market can resume its robust growth next winter,” it said.
The pandemic has delivered a heavy blow especially to the short-term rental market build around platforms such as Airbnb. Hypo reminded that before the crisis the share of non-subsidised studio flats rented to short-term tenants stood at around 10 per cent in Helsinki and even higher in Rovaniemi. What separates the two markets, however, is there should be no shortage of takers for houses in Helsinki.
“The coronavirus has killed tourism and remote work domestic assignments. Thousands of flats have been moved to the regular rental market at considerable discounts, and sales are being considered,” it said.
“The ones emerging as winners from the shake-up are first-time home buyers, who finally have something to choose from and do not face as heavy competition.”
The pandemic has a silver lining also for mortgage borrowers, as it should ensure interest rates remain at record-low levels for a while.
Hypo wrote that although the present crisis is not directly comparable to earlier epidemics, the nature of its impact is fairly obvious: all but the largest investors will withdraw from the market, access to financing will be restricted, the ability and readiness to take risks will take a hit, the rise in rents will come to a halt and the incomes – or at leats income outlooks – of buyers will erode.
“Lay-offs and bankruptcies will compel people to even mull over selling their home if the crisis drags on late into the year. There may be fire sales also from cash-strapped housing funds and over-indebted new settlements,” it said.
“On the other hand, the house market returns to its earlier trajectory rapidly after crises.”
Aleksi Teivainen – HT