HOUSE PRICES in Finland will stay on a downward path in 2023, forecasts Nordea.
The Helsinki-based financial services group reported last week that it expects house prices to fall by an average of five per cent next year. The fall could be even steeper in the capital region because of an oversupply of small houses and bigger housing loans and interest costs compared to other parts of the country.
The prices of single-family houses, meanwhile, are to decline as rising energy costs dampen interest in properties with electric heating.
Nordea pointed especially to the slowdown witnessed in October. The Federation of Real Estate Agency, it noted, has reported that the number of property sales fell 23 per cent short of the monthly average from the past decades.
Mortgage borrowers have also received some good news as the increase in short-term and long-term interest rates came to a stop late in the autumn. Nordea said Euribor 12, the most common reference rate for housing loans in Finland, is unlikely to increase as rapidly next year as it has this year and flatten out at three per cent.
The house market is to face its greatest headwinds early next year as economic growth is expected to be the slowest.
Jussi Pajala, the head of Nordea Mortgage, said Finns are well prepared for the headwinds. One in seven mortgage borrowers, he told, have hedged their loans against interest-rate risks or have savings or other wealth that enables them to weather the toughest months.
“Repayment holidays also provide flexibility, and their utilisation remains below the long-term average,” he added.
First-time house buyers could benefit from the market situation as the high supply and falling prices of one and two-bedroom flats enables them to weigh up their options more thoroughly than previously. Another positive in the big picture is that the economic recession is expected to be short and the outlook for the house market is brighter for the end of next year.
Nordea also played down concerns that the exceptional market situation could lead to the kind of collapse witnessed in the 1990s. Analyst Antti Koskivuo reminded that the economy is currently sliding toward a recession by inflation and the energy crisis, unlike in the 1990s and during the financial crisis of 2007–2009.
“The Finnish or the global economy is not faced with the kind of structural problem witnessed during the previous crises, which is why the possible recession will likely be moderate and no widespread unemployment is expected,” he explained.
“Strong employment will buttress the current property market situation even if the development did cool down moderately in the coming months.”
Also interest rates remain below the five-per-cent mark witnessed during the financial crisis and well below the double-digit figured witnessed in the 1990s. The current rates could prompt borrowers to cut back on other spending rather than putting their home on the market.
Nordea stated that it expects the rental market to stabilise gradually. With the sales of new houses slowing down, at least some of the unsold ones will probably trickle down to the rental market, it explains.
“Demand for rental houses is growing, and the number of rent notifications has decreased. Interest in living on rent is growing because rents are rising less than the costs of owner-occupied housing. No broad-based shift from owner-occupied housing to renting is presently in sight, however,” said Pajala.
Aleksi Teivainen – HT