A real estate broker hosted a viewing in Tapiola, Espoo, on 30 March 2021. (Heikki Saukkomaa – Lehtikuva)


THE HOUSING MARKET in Finland was exceptionally strong in 2021, according to OP Financial Group.

The market was busy particularly in the first two quarters of the year, but, even though it slowed down slightly for the latter two, house prices increased by an average of 3.7 per cent in the country – the highest annual increase in 10 years.

While the prices surged especially in large cities, the increases were unusually broad-based and affected both detached houses and units in housing companies.

Economists at OP Financial Group revealed in their market review that they expect house prices to rise by 2.5 per cent year-on-year in 2022. The increase, though, is expected to slow down to 1.5 per cent in 2023, close to the levels preceding the coronavirus pandemic, due to factors such as active residential construction in recent years.

“Last year was altogether excellent in the housing market. The prices increased at a record-high pace, but not at a pace that caused significant imbalances,” commented Joona Widgrén, an economist at OP Financial Group.

“The levelling off of house sales witnessed at the end of the year was nevertheless a welcome development. Housing market activity remains strong, even though some lulls will also be seen this year.”

Market expectations about an increase in interest rates have increased significantly in recent years. Euribor 12, the most common reference rate for housing loans in Finland, is expected to re-emerge above zero no later than next year, according to OP Financial Group. The reference rate has rebounded notably in the past two weeks, climbing from -0.453 on 31 January to -0.285 on Tuesday, 15 February.

The expectations are already reflected in the popularity of mechanisms that protect borrowers against rises in interest rates, such as interest rate caps and corridors.

“A rise in interest rates can have an impact quickly on the lives of mortgage borrowers, but it is especially reflected in the outlook for 2023,” told Widgrén.

The Finnish financial services provider also looked into the number of unoccupied houses, a category that includes second homes and houses rented out on a short-term basis. While more than one in ten (11.4%) of the entire housing stock is not permanently occupied, the percentage varies notably based on location, standing at 9.7 per cent in urban municipalities, 13.9 per cent in densely populated municipalities and 18.4 per cent in rural municipalities.

The number of unoccupied houses has increased throughout the 2000s.

“It is looking like the upward trend in the number of unoccupied houses has even accelerated in recent years. There are numerous reasons for this, including an increase in wealth and short-term renting. The phenomenon warrants further attention as it can have an effect on the balance of the housing market.”

Aleksi Teivainen – HT