HOUSE PRICES in Finland fell by more than five per cent year-on-year in February.
Statistics Finland on Thursday reported that the prices of old dwellings in housing companies fell especially in large cities – by 10.4 per cent in Vantaa, 7.1 per cent in Helsinki and 6.8 per cent in Oulu.
While the six largest cities in the country recorded a drop of 6.1 per cent and the capital region a drop of 6.7 per cent from the previous year, areas outside the largest cities registered one of 4.4 per cent.
Also the volume of sales decreased, with real estate agents brokering 15 per cent fewer sales in February 2024 than in February 2023.
The preliminary data offer some grounds for optimism, too. The prices of old dwellings in housing companies crept up by 1.4 per cent from the previous month, with increases recorded also in all large cities.
“In February, the development of home prices was better than expected both in and outside the capital region. The development witnessed at the start of the year is a reflection of the tax code change that took effect at the turn of the year, which encouraged first-time home buyers to take action late last year and decreased sales early this year,” Joona Widgrén, a senior economist at OP Financial Group, analysed according to Helsingin Sanomat.
“[The change] explains the lacklustre sales in January—February.”
Although house prices developed slightly better than the financial services provider expected, a more meaningful recovery will hinge on market activity, according to Widgrén.
“People will still have to wait for a recovery in the house market because sales volumes recover will have to recover before prices start increasing on a more permanent basis,” he stated.
Also Juhana Brotherus, the chief economist at the Federation of Finnish Enterprises, estimated that the market will continue to decline for some time. An upswing, he predicted, will not occur until later this year once falling interest rates and strengthening purchasing power make the financial equation more favourable for potential buyers.
“The house market is being depressed by hard and soft headwinds,” he wrote. “Buyers are losing interest because interest costs and maintenance fees can exceptionally be even higher than rents. Also loan repayments add to the monthly costs. At the same time, households are extremely cautious and sensitive to crises because their general sense of security has been shaken by the coronavirus, energy, war and, most recently, strike crises.”
“The uncertainties are reducing especially large acquisitions, of which home is the most important.”
Veera Holappa, a senior economist at Pellervo Economic Research (PTT), is slightly more optimistic, estimating that the return of first-time buyers could provide a boon to the housing market as soon as this spring.
“As household sentiment improves and first-time house buyers are starting to return to the market, chains of sales will start going through. It could rejuvenate the market as soon as at the dawn of summer,” she said.
Aleksi Teivainen – HT
