A construction site in Espoo, Southern Finland, on 9 August 2023. The slowdown in residential construction is expected to last for a while as construction companies have been left with an unusually large inventory of newly built homes due to consumer reluctance to enter the house market amid high interest rates. (Heikki Saukkomaa – Lehtikuva)
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THE PRICES of old dwellings in housing companies fell by 4.0 per cent year-on-year and 0.1 per cent month-on-month in April, according to preliminary data released by Statistics Finland on Tuesday.
The depreciation was noticeable particularly in the most populous parts of the country, with the year-on-year drop coming in at 5.2 per cent in the six largest cities and 6.4 per cent in the capital region. Vantaa saw the prices of old dwellings fall by as much as 9.1 per cent, Oulu by 7.7 per cent and Helsinki by 6.4 per cent.
Turku was the only large city that did not register a drop in house prices.
Outside the six largest cities, the prices of old dwellings declined by 1.9 per cent from April 2023.
Statistics Finland also pointed out that the number of old dwellings in blocks of flats and terraced houses that were sold through real estate brokerages increased by 17 per cent from the previous year.
Helsingin Sanomat reported earlier this week that a number of indicators suggest the situation in the house market is worse than it has been for decades. Consumers are reluctant to enter the market as benchmark rates remain elevated, relative to the 2010s, leaving construction companies with a large inventory of unsold new homes – particularly as the projects kicked off before the jump in interest rates are only now being completed.
“The number of newly completed homes will go down for the next year or two. The high number of newly completed homes has explained the drop in prices so far,” Juho Keskinen, an economist at the Mortgage Society of Finland (Hypo), said in the report published on Tuesday.
The house market is also likely to start recovering through old dwellings because they are typically regarded as safer purchases than newly built homes.
“Construction won’t re-start until the sales of newly built units start picking up and the inventory of new homes has been exhausted to a sufficient extent. The cycle may be pronounced,” commented Keskinen.
Prices, meanwhile, will start recovering only after sales volumes increase and sales times shorten. Hypo has compiled historical data indicating that prices tend to recover six months after sales in populous areas and up to a year after sales in smaller markets.
Veera Holappa, a senior economist at Pellervo Economic Research (PTT), stated to Helsingin Sanomat that house prices have returned to an upward trajectory. “It does look like the low point has been reached. Households have started recovering from the interest rate shock and also real estate investors have dared to return to the markets in some numbers,” she argued.
Keskinen, in turn, interpreted statistics from the early parts of the year as an indication that the decline in home prices has let off.
“I don’t think the increase will continue at the clip seen early this year, but it looks likely that the development will even out before prices start rising. We won’t see a clear rise until next year,” he predicted.
Aleksi Teivainen – HT
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Source: www.helsinkitimes.fi
