Finnish real estate market to cool down, according to forecasts

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Finnish real estate market to cool down, according to forecasts

Rooftops in Töölö, Helsinki, in October 2021. Huoneistokeskus, a Finnish real estate agency, says demand for smaller houses is beginning to recover from the effects of the coronavirus pandemic. (Jussi Nukari – Lehtikuva)

THE WAR in Ukraine will accelerate inflation and inhibit economic growth in Finland, thereby creating uncertainty among households and undermining the growth of the real estate market, forecasts Handelsbanken.

The Sweden-based financial services provider is expecting house prices to creep up by two per cent in 2022 and one per cent in 2023. Also rents are forecast to start rising after a period of stagnation.

“The return to normal, the lifting of restrictive measures and the temporary dip in real estate sales will boost demand for rental homes. The developments will simultaneously support an increase in rents following a lull brought about by the [coronavirus] pandemic,” Janne Ronkanen, a senior economist at Handelsbanken, stated on Wednesday.

The bank is forecasting that inflation will accelerate to 4.5 per cent in 2022 but slow down to 2.3 per cent in 2023.

The surge in consumer prices has been driven by factors such as soaring housing costs, which are attributable to high electricity and construction material prices, and a major labour shortage in the construction industry. High inflation, in turn, will gnaw away at the real purchasing power of households.

“Russia’s attack on Ukraine will keep inflation at a higher-than-forecast level this year. Increases in crude oil, energy and food prices on the global market will speed up inflation also in Finland,” the forecast reads.

Huoneistokeskus on Wednesday revealed in its review of the real estate market that the sales of old houses fell by 8.6 per cent year-on-year in February and by 5.1 per cent between January and February.

The sales of old terraced and detached houses decreased by about 15 per cent, while those of old flats only by 3.5 per cent.

“Numbers from the start of this year suggest that the busy years for real estate sales are coming to an end and the real estate market is returning to the levels that preceded the coronavirus pandemic,” analysed Marina Salenius, the chief operating officer at the Finnish real estate agency.

One sign of the market normalising is that the sales of small houses have picked up in some urban regions, such as the Helsinki neighbourhoods of Harju, Kallio, Kalasatama, Kyläsaari and Sörnäinen. In Kalasatama and Kyläsaari, for example, the sliding six-month average price per square metre has surged by 24 per cent.

The sales of small houses have picked up also in Kuopio and Lahti, according to Huoneistokeskus.

“The demand is no longer focused as strongly on houses with three or more bedrooms, and interest in detached houses is lower than in previous years,” said Salenius.

“The situation is good for people moving houses. When demand and supply are distributed more evenly between all types of houses, it enables the normal cycle of moving houses – from a one-bedroom to a two-bedroom house and then to a house with three bedrooms or larger and, once children have moved out, a transition back to a smaller house.”

Aleksi Teivainen – HT


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