ECONOMISTS at OP Financial Group expected to see a significant drop in real estate prices in Finland in 2023.
The Finnish financial services provider reported yesterday that it is forecasting rising interest and housing costs to drag down real estate prices on average by 4–6 per cent, including by 5–7 per cent in Greater Helsinki.
Prices outside the capital region are expected to fall by 3.5–5.5 per cent.
“The turn in the property marker has been quick, and the clear downward trend will continue at least until early next year. It is possible that the situation will no longer erode at the end of next year if uncertainty over interest rates abates and the employment situation remains good,” analysed Joona Widgrén, an economist at OP.
In Finland, real estate prices decreased by around 3.5 per cent during the third quarter of the year. The decrease stood at 4.5 per cent in the capital region and at 2.5 per cent outside the capital region.
Widgrén reminded that although prices have begun to decline across the country, the declines have been particularly sharp in the largest population centres and for small residential units. The prices of one-room flats, for example, fell on average by 3.2 per cent, whereas those of three-room and larger houses crept up from the previous year.
OP Financial Group also highlighted that interests costs as a proportion of disposable household income have started to increase after staying at an exceptionally low level in recent years. The debt servicing burden, it added, is distributed fairly unevenly between the largest urban areas and other parts of the country, unlike disposable income.
The burden is defined as the share of interest and other servicing costs of disposable income.
The economists calculated that the burden – defined as the proportion of interest and other debt servicing costs of disposable income – stands at about 46 per cent in Helsinki, compared to only 25 per cent in other parts of Finland.
The burden was calculated for a medium-size unit in a housing company financed with a loan equalling 85 per cent of the value.
A similarly bleak forecast was delivered in early December by Nordea. The Helsinki-based financial group predicted that house prices could fall by roughly five per cent in 2023 but dispelled fears of the kind of collapse seen in the early 1990s.
Aleksi Teivainen – HT