Housing sales start to recover

Houses and apartments are being sold at prices that are higher than at the same time last year.
      The Central Federation of Finnish Real Estate Agencies (KVKL) reports that the prices of apartments in old apartment buildings were 4.5 per cent higher in the July-September period than at the same time last year.
     
A year ago at the same time a square metre of living space in an apartment building cost an average EUR 2,008. This year the price had gone up to about EUR 2,102.
      In Helsinki, the average price of a square metre of living space in an apartment building is about EUR 3,600.
     
In addition to rising prices, the number of deals that were closed also grew. In July-September, 8,500 apartments in old buildings were sold, which is 10 per cent more than a year ago at the same time.
      Old apartment houses account for about half of all real estate deals that take place in Finland.
     
The figures come from statistics involving about 90 per cent of real estate deals in which an estate agent was involved. The figures do not include deals that were closed without the mediation of an estate agent.
      In Finland, about 80 per cent of home sales take place through a real estate agent.
     
The past year to eighteen months has seen considerable fluctuation. In the spring of 2008, prices were at a record high. Immediately after the summer, prices began to fall, and sales nearly petered out in 2008.
      This year began nearly as slowly as the previous year ended, but from the spring, sales have been recovering. Initial figures suggest that more sales were made at higher prices than has been the case in a long time.
      So when the January-September period this year is compared with the same period of 2008, the price levels are the same, and prices are gradually rising above that level.
     
A number of reasons have been given for the rising prices.
      Interest rates are low, there is little construction of new housing, about 30 per cent fewer dwellings are on sale than a year ago, and the stagnation of sales at the end of last year led to a buildup of demand, which is now being released.
     
KVKL managing director Jukka Malila says that Finland may be experiencing a spike in housing prices.
      He emphasises that the spike is not the same as a housing bubble, of which there have been warnings.
      “A bubble takes place when the buyer of an apartment buys it because he or she believes or expects the value will rise rapidly. There is only very little of this sort of thing in Finland at the moment. People are buying homes for their own use”, Malila says.
      If a spike is what is going on now, those considering buying a place to live will certainly be interested to know how deep or shallow a dip will come after the spike is over.
      Economist Petri Mäki-Fränti of the Pellervo Economic Research Institute (PTT) does not expect a collapse any time soon.
      A year ago PTT predicted that prices of dwellings would decline by between five and ten per cent in the following two years.
      “It is quite surprising that the decline was not greater. The fall in interest rates and rises in pay have helped maintained a capacity to buy apartments, even though unemployment has grown. It seems that a stable base has been reached on the housing market”, Mäki-Fränti says.
     
PTT does not believe that prices of apartments will start growing rapidly in a situation in which economic growth is slow and unemployment is high and growing.
      The departure of professional investors from the market - once they have had their fill - could continue to rock the boat, at least in the Greater Helsinki region.


Previously in HS International Edition:
  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)
  Prices of homes up by as much as 70 per cent in Helsinki in six years (7.8.2007)

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

Links:
  Statistics Finland - Housing
  The Central Federation of Finnish Real Estate Agencies (KVKL)