THE WANING of the coronavirus pandemic will cool down the housing markets in the Nordics, predicts Danske Bank.
House prices have climbed rapidly across the region in the past year as people have looked for abodes with more space for remote work, study and free-time activities – by as much as 18 per cent in Denmark and Sweden, 11 per cent in Norway, and almost five per cent in Finland.
“People have looked for more spacious houses while the supply has been lower by coincidence. We expect the opening of societies to push household consumption from housing to other areas, which will slow down the increase in prices,” Las Olsen, the chief economist at Danske Bank, commented on Friday.
Authorities across the Nordics are also expected to tighten regulation on housing markets. The Finnish government is planning on capping total household debt at 450 or 500 per cent of gross annual, a measure that appears to have had an impact on house prices in Norway, according to Pasi Kuoppamäki, the chief economist at Danske Bank Finland.
“Although banks have a flexibility reserve of ten per cent on new loans, regulation appears to have slowed down price increases in Norway. The debt ceiling appears to have had an impact especially in areas where prices have risen rapidly, like Oslo,” he said.
The debt ceiling could have a similar impact in Finland, viewed Jussi Pajala, the chief executive of Nordea Mortgage Bank.
“There has been discussion that the debt ceiling could limit the development of house prices, but it’s not out of the question that it could bring about an opposite trend, a declining market. That wouldn’t have good consequences,” he was quoted as saying in a news conference on Friday by Helsingin Sanomat.
Pajala also estimated that the ceiling could inhibit labour mobility and undermine the possibilities of younger generations to accumulate wealth
Nordea on Friday published its latest forecast for the Finnish housing market, viewing that sustained demand in the market will create pressure for additional price increases in the second half of the year. The number of market transactions has increased significantly since last spring, currently nearing 7,000 per month compared to 5,000–5,500 before the pandemic.
“The number of sales is unusually high,” confirmed Juho Kostiainen, an economist at Nordea. “Sales have previously been strong in the capital region and other growth centres, but now they’re good also in other parts of Finland.”
Data from Statistics Finland indeed suggests that the demand will remain high. Its consumer confidence index for last month revealed that nearly 17 per cent of consumers are considering buying a house in the next year.
The demand has been directed especially at single-family homes. The consequent price increases have been substantial, at roughly 15 per cent, in Hyvinkää, Järvenpää, Kerava and Nurmijärvi.
“The rise in single-family house prices is a new phenomenon as those prices had been stable for the last 10 years,” noted Kostiainen. “People are looking for space a bit further away from growth centres. It doesn’t mean that growth centres are losing traction, but simply that the migration flows will spread over wider areas around the centres.”
Aleksi Teivainen – HT