A person examining the floor plan of a flat in 2024. Nordea on Wednesday published its latest housing market review, revealing that it expects Finnish house prices to rise by 1.5 per cent in 2025 and 2.5 per cent in 2026 primarily on the back of declining interest rates. (Anni Savolainen – Lehtikuva)
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“PEOPLE are currently looking for good quality at a reasonable price in the housing market,” Juho Kostiainen, an economist at Nordea, summarised in the housing market review of the financial group headquartered in Helsinki.
“This kind of a phenomenon is typical in a situation where the market situation has not fully normalised.”
Kostiainen on Wednesday estimated that a “major change” has taken place in the housing market over the past year. Nordea reported that home sales fell about 10 per cent short of the long-term average in January, a marked improvement from the 30-per-cent gap registered in January 2024. The decline in home prices has similarly petered out, with the financial group expecting prices to rise by 1.5 per cent in 2025 and gain further upward momentum in 2026.
“In 2026, prices are expected to increase by 2.5 per cent as construction activity remains muted for already the third consecutive year, gradually reducing the housing supply,” he said.
The market is buoyed particularly by falling interest rates.
Short Euribor rates are forecast to settle around two per cent during the course of this spring, according to Nordea. The 12-month rate, the most common reference rate for housing loans in Finland, fell to 2.4 per cent on Wednesday. The three-month rate, which gained popularity during the recent rate spikes, dropped a fraction below 2.5 per cent.
The European Central Bank (ECB), Kostiainen said, is likely to make two additional interest rate cuts in the spring on grounds that inflation in the eurozone has fallen and economic growth remains sluggish.
A factor holding back the recovery of the housing market, however, is that many households continue to feel the financial strain of the high inflation and interest rates witnessed in the past few years. Nordea revealed that the phenomenon has resulted in a contraction of the housing loan stock, with consumers preferring to pay off rather than run up more debt.
Although the market has picked up, homes take a relatively long time to sell – on average more than 100 days. Nordea interpreted this as a sign that households are postponing major acquisitions due to uncertainty arising from the eroding employment situation and geopolitical flux.
The sales of newly built homes, it added, are “extremely sluggish”.
The financial group also called attention to a trend toward tighter hosing arrangements particularly in regions experiencing population growth. Revisions to the housing allowance for students have encouraged young people to explore shared housing or postpone moving out of home, while immigrant households have an average of 10 square metres space than native-born households.
There are consequently fewer households, but the households are larger. This is pushing demand toward larger houses instead of small flats targeted traditionally at students.
“The consolidation of housing and the slowing growth of the number of households is slowing down growth in housing demand. The oversupply of housing will be worked out slower than expected,” commented Kostiainen.
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
