Housing prices rising in spite of recession

In spite of the ongoing recession, prices of apartments in Finland rose sharply in Finland last year.
      According to advance information by Statistics Finland, a home in a row house cost nearly eight per cent more at the end of last year than in late 2008.
     
The price rise was greatest in the Helsinki region, where housing is generally more expensive than in other areas.
      In the Helsinki area, the increase was more than ten per cent. Helsinki itself saw the sharpest increase - 11.6 per cent. In Espoo and Kauniainen, the rise was also more than ten per cent, while in Vantaa it was just six per cent.
      The increase affected both old buildings, as well as new ones. Nationwide, the average increase in price for new apartments was 3.5 per cent, while it was nine per cent in the Helsinki region.
     
The rising trend began in the spring, and grew stronger as the year went on. At the end of the year, many real estate agents reported record sales.
      “Some of the increase is a bounce back, while part of it stems from scarcity”, explains Jukka Malila, Managing Director of the Central Federation of Finnish Real Estate Agencies (KVKL).
     
When the financial crisis took hold in the autumn of 2008, the housing market stagnated almost completely; sales of new residences had slowed down from the summer, and eventually came virtually to a complete halt. Construction companies found themselves with hundreds of unsold dwellings.
      In early 2009 nobody knew what direction the world economy would take, and the housing market remained quiet. Only those who absolutely had to buy a home were doing so.
     
In the spring, people started buying homes again. Prices had come down at the beginning of the year, and especially those buying their first apartment returned to the market.
      In the autumn of 2009 there was actually something of a shortage of available dwellings; construction had stagnated, and interest rates on loans were at a record low.
      Many who had been frightened by the economic downturn into postponing plans to buy a home changed their minds. Consequently, demand suddenly exceeded supply.
     
The years 2008 and 2009 were mirror images of each other with respect to the housing market. At the beginning of 2008, prices were at a peak. In the autumn, sales stagnated and prices fell. In early 2009 prices were low and sales were sluggish, but in the autumn, prices rose and new records were set in the number of sales.
      As a whole, average housing prices in 2009 were largely unchanged compared with 2008. The average price per square metre of old buildings was EUR 2,086 throughout Finland, and EUR 3,132 in the Helsinki region.
     
So the recession year 2009, when tens of thousands of people in Finland lost their jobs, and when GDP went down by seven per cent, will go down in history as a time when housing prices defied precedent and did not fall.
      “It appears that consumer faith and confidence in the economy has been channelled into the housing market”, says Anssi Rantala, head economist of the OP-Pohjola Group.
      Rantala does not believe that the prices will continue to rise this year as sharply as at the end of 2009, especially in a situation in which unemployment is expected to continue to grow.
      “Housing construction will start to recover gradually, and interest rates will rise. Another reason why the increase cannot continue at such a high rate is that people’s ability, and desire, to pay are limited”, Rantala says.


Previously in HS International Edition:
  Housing prices continue to rise (2.11.2009)
  Housing sales start to recover (8.10.2009)
  Statistics Finland: 29 January 2010 Dwelling prices went up in October–December
  Demand for housing loans has picked up significantly (5.1.2010)
  Autumn fall in interest margins on housing loans peters out (21.12.2009)