Housing prices continue to rise

Price difference widens between Helsinki area and rest of Finland

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The discrepancy in the housing prices between the Greater Helsinki Area and the rest of the country keeps growing.
      In July-September the prices of apartments in old residential blocks and terraced houses in Helsinki and the rest of the capital area exceeded the level of the same period in 2008 and they are still rising. By contrast, the housing prices in the rest of the country, even in the growth centres, were lower than a year earlier, and in places continue to fall.
      On average, the price per square metre of an old residential flat in the capital area is now EUR 1,407 higher than elsewhere in Finland. Since the beginning of the year this discrepancy has widened by nearly 200 euros.
     
These were among the findings of a Statistics Finland report from last week on the prices of dwellings in the third quarter. The figures were compiled from data supplied by the Tax Administration.
      According to Statistics Finland, “compared to the corresponding period of the year before, the prices of old dwellings in housing companies went up by 0.2 per cent in the whole country”.
      “The housing market has now bounced back to its normal state”, says managing director Matti Inha from the home financing specialist Hypo.
      “The rise in the housing prices has sped up, among other things, by the consumers’ recovered trust in the economy, the bottled-up demand from last year, and the low interest level”, says economist Petri Mäki-Fränti of Pellervo economic research institute PTT.
      “People are relying perhaps even too heavily on the interest level remaining low”, Mäki-Fränti reckons.
     
In the rest of the country, the July-September housing prices remained over a half a percentage point below the level in the third quarter of 2008. Prices went down for example in Tampere and the entire Pirkanmaa province, and also in Oulu.
      Mäki-Fränti points out that based on past experience the price development in the rest of the country will follow the capital area with a couple of months’ delay.
      This is, for example, because the interest rates and the income development are convergent in the whole country.
     
But of course there are exceptions.
      Hypo’s Inha points out that for example in Oulu the downward trend in housing prices may this time turn upwards only very slowly. This is because of the recent years’ building boom that has left the supply of new residences fairly high.
      Regional variation is also increased by other factors, such as large investments, which can have the opposite effect as labour and growth prospects are drawn to an area.
      Mäki-Fränti believes that the sudden price hike is a passing trend, however. With the deepening unemployment, weakening purchasing power, and gradually rising interest level, it should even out in the course of next year.
      Inha agrees: “The recession is not over yet. From the unemployment perspective, the coming winter will be bad.”


Previously in HS International Edition:
  Housing sales start to recover (8.10.2009)
  Prices of homes up by as much as 70 per cent in Helsinki in six years (7.8.2007)
  Housing loan interest rates nudge upwards after long decline (27.5.2009)
  Number of new housing loans turned clearly downwards in August (1.10.2008)

See also:
  House prices started to rise in the spring (11.9.2009)

Links:
  Statistics Finland Press Release

Helsingin Sanomat