HOUSE PRICES in Helsinki have started to decline after rising for several years.
Statistics Finland in September released preliminary data indicating that the prices of old dwellings in housing companies decreased by 1.6 per cent year-on-year in August. House buyers paid on average 5,520 euros per square metre for their dwelling.
House prices in other parts of the capital region continued to creep up. Espoo and Kauniainen registered a year-on-year increase of 1.9 per cent to 4,176 euros per square metre, and Vantaa one of 2.4 per cent to 3,212 euros per square metre. Espoo and Kauniainen, however, saw house prices drop by 1.8 per cent between July and August.
Juhana Brotherus, the chief economist at the Mortgage Society of Finland (Hypo), on Tuesday told Helsingin Sanomat that the drop in prices was hardly surprising in light of slumping consumer confidence and surging interest rates. As the Finnish capital has the highest number of real estate investors, it is typically the first area to reflect swings in the economic situation.
“People buying their own house are slower to react. When the economic outlook changes, people don’t immediately start putting up their homes for sale. Investors are quicker in their reactions.”
The rise in interest rates is another factor with a pronounced impact on Helsinki, as the rise affects residents of expensive neighbourhoods the most.
“If you have a loan worth hundreds of thousands, a few-per cent increase in interests is a substantial cost. If you have a loan worth tens of thousands, a few per cent isn’t too much to shoulder,” he explained to Helsingin Sanomat.
Prices in Helsinki, he added, are falling also due to the high pace of residential construction, which is expected to continue into next year.
Brotherus reminded that a long-term decline in house prices can contribute to a recession by prompting mortgage borrowers to reduce spending. While the current trend prolonging could force some to sell their homes at a loss, many should be able to fall back on the buffers that developed as house prices surged during the coronavirus pandemic.
“Prices would have to fall significant – we’d have to be talking about ten per cent – to be at the same level as they were in 2019,” he stated to the newspaper.
He forecasts that the downward trend in house prices will continue until the end of the year but, barring something unexpected occurring, will not be enough to wipe away the increases witnessed in the seven months of the year.
“I think the decline in house prices will continue for a year. We’ll be closer to 2024 before we see a clear turn for the better,” he said, adding that the possibility of a severe recession and sharp price drops cannot be ruled out entirely.
“The risks are presently exceptionally large in the house market across the country, including the capital region.”
Aleksi Teivainen – HT