Construction was underway at the site of the Housing Fair in Loviisa on 25 May 2023. The prices of newly built houses may have come down by much more than suggested by official statistics given gaps in the data used to compile the statistics, an economist has said to Helsingin Sanomat. (Eelis Berglund – Lehtikuva)


THE PRICE DEVELOPMENT of new residential units has been weaker than official statistics suggest due to gaps in the statistical monitoring of prices, Juhana Brotherus, the chief economist at the Federation of Finnish Enterprises, stated to Helsingin Sanomat on Wednesday.

Brotherus believes the prices of new dwellings in housing companies dropped much more sharply in the first quarter of the year than the two per cent suggested by official statistics.

“[The drop] was much closer if not bigger than the one for old dwellings,” he said.

The prices of old dwellings in housing companies decreased by 5.5 per cent year-on-year between January and March, according to data released by Statistics Finland. The data also show that the sales of newly built dwellings decreased by more than 70 per cent from the corresponding period in 2022.

Brotherus, formerly the chief economist at the Mortgage Society of Finland (Hypo), is suspicious about the reported drop for new dwellings partly because prices have fallen especially for houses coveted by investors and located in more expensive neighbourhoods.

“Investors prefer new units and new units are more expensive than the rest of the housing stock. I’d be very surprised if the price development of new units was stabler than old units,” he said to the newspaper.

Another reason for his suspicions is the different type of data used to compile the price statistics for old and new dwellings.

Price statistics for old dwellings are based on information and transfer tax reports submitted to the Tax Administration, meaning the underlying data consist of almost all sales. Statistics for new dwellings, by contrast, are incomplete as they are based on reports made by real estate agencies and construction companies to the price monitoring service of the Federation of Real Estate Agency (KVKL).

“Statistical monitoring for new houses is of significantly lower quality than the really high-quality, transfer tax report-based monitoring for old houses,” Brotherus stated to Helsingin Sanomat.

The quality concerns stem from the fact that, unlike old dwellings, new dwellings are typically sold directly by construction companies – although they are increasingly turning to real estate agencies for help amid the market slowdown. Brotherus viewed that construction companies have an “obvious interest” to report high house prices but not low prices because they realise that agencies and households use the information to evaluate the market prices of vacant dwellings.

“It’s an open secret that price statistics for new dwellings aren’t of particularly high quality,” he said.

Construction companies also seek to fuel sales with various financial incentives that are not necessary reflected in the official price statistics.

Units built for the Housing Fair in Loviisa by Vantaa-based Cubesta, for example, include two years of free use of a Tesla 3, with a yearly maximum mileage limit of 15,000 kilometres, if the sale is finalised by the end of July.

“Honestly, I have to say that house sales are rather slow,” Ilkka Rainio, the managing director of Cubesta, explained the motivation behind the campaign to Helsingin Sanomat on Saturday, 3 June.

Brotherus on Wednesday pointed out that such offers are fundamentally price cuts.

“Price cuts are often not implemented as price cuts per se, but as cuts in maintenance fees or promises to pay for remodelling. Technically they’re price cuts,” he argued.

Aleksi Teivainen – HT