Fall in property prices expected to continue next year

Apartment prices fell across the country by 1.4% between July and September

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The decline in prices of old properties, which started in the capital area during the summer, will continue well into next year, experts predict.
      The estimates regarding the extent of the price drop vary from a couple to ten percentage-points.
      According to a Thursday announcement by Statistics Finland, the price of old residences came down in July-September in the capital area by 3.0 per cent and in Finland as a whole by 1.4 per cent.
      Within the capital area the greatest decline took place in central Helsinki, where the price of old apartments fell by an average of 5.3 per cent.
     
A year from now the price of residential properties will have been shaved by about 10%, estimates chief economist Timo Lindholm of Pohjola Bank.
      Other housing market experts predict more a moderate decline.
      “Closer to zero than five per cent”, reckons managing director Tommi Rytkönen of the Kiinteistömaailma real estate agency.
      Rytkönen expects a cautious resurgence to start towards the end of 2009.
      Chief executive Matti Inha of home financing specialist Hypo also predicts that the fall in residential property prices will settle somewhere between zero and five per cent.
      “It goes without saying that the end-of-year housing market is going to be difficult”, Inha adds.
      The number of settled property deals declined across the country by around 20% during the same period, and by 305 in Helsinki, according to Statistics Finland.
      Those active in the market at present are basically people who have to buy or sell, for instance because of divorce or a death in the family. Those who are "living out their dreams of a new home" have quietly withdrawn from the fray.
     
In time the decline in residential property prices and the slowing down of the housing market will have even more far-reaching effects, economists predict.
      The awareness of the shrinking of one’s equity keeps people’s spending in check. If private spending ceases to grow or even starts to fall, this will be felt in the national economy development.
      “Furthermore, when prices fall, construction ceases. This will lead to unemployment in the building industry”, warns chief economist Timo Tyrväinen of Aktia Group
      Other affected fields will include home furnishings, reovals firms, real estate brokerage, and lending.
     
Tyrväinen believes that the downward trend in the housing market will continue. Just like Lindholm, Tyrväinen also foresees a 10% price drop over the next year or so.
      According to Lindholm, such a development would restore the ratio between consumers’ average monthly net salaries and property prices per square metre to the 2000-2001 level, which at the time was regarded as reasonable.


Previously in HS International Edition:
  Clear downward trend in prices of one-bedroom Helsinki flats as well as large residences (16.10.2008)
  Number of new housing loans turned clearly downwards in August (1.10.2008)
  Student housing situation in Helsinki worse than at any time this decade (8.8.2008)
  House prices rocketing in Helsinki Metropolitan Area (14.10.2004)

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