New dwellings selling just as well as a year ago

Small apartments are being bought at a rate that may lead to shortage of supply by autumn

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The sale of new dwellings has clearly picked up in the capital area. During the spring the pace returned nearly to the same level as a year ago.
      If this trend continues, the supply of unsold small dwellings will be reduced quickly, and by the autumn there may already be a shortage of available apartments.
      First-time buyers and private investors have rushed for the opportunity to purchase flats that have remained empty for months, because the current interest rates are so low.
     
Thirty-somethings Rita Palmqvist and Tuomas Elenius are presently arranging the furniture in their new two-bedroomed apartment.
      At the beginning of June the former renters moved into their first owner-occupied home in a block of flats that was completed in Vantaa’s Tammisto district last autumn. Now all the units in the building have been sold.
      “We felt we had given away money to other people for long enough. We were warned not to buy, but because we both had secure job situations we thought, why not”, explains Palmqvist.
      The decision was made when Elenius became an IT entrepreneur and a home office space was needed.
      The purchase was speeded by building firms’ special offers. “The situation offered buyers a chance to haggle boldly and this paid off”, smiles Elenius.
     
The selling of family dwellings takes place a tad more sluggishly.
      “In an attempt to avoid creating two-home traps, banks have decided not to give loans before the old dwelling has been sold”, explains country manager Juha Korkiamäki at NCC Housing Finland.
      Bank of Finland head of office Veli-Matti Mattila, who has closely followed the housing market, reckons that there are even more potential buyers. “Those thinking of changing homes have wanted to see how much the prices will come down.”
     
Only a few dozen new residential blocks will be completed in the capital area during the course of the summer. After that no new dwellings will enter the market, for building firms put a more or less complete freeze on the construction of non-subsidized dwellings a year ago.
      “When the supply shrinks but there is still demand, there is danger that the prices will start heaving themselves up again”, Mattila estimates.
      Helsinki Deputy Mayor Hannu Penttilä fears the same.
      Construction firm YIT has already considered raising its prices for small flats.
      The City of Helsinki’s decision to discard the rule that the average size of dwellings in blocks of flats should be 75 square metres is being hailed by construction firms. “Now there is freedom to create more small dwellings than before. This is crucial from the point of view of many new projects”, says Korkiamäki of NCC.
     
Construction firms are still hesitant with regard to starting new projects, even when the building permits have already been secured.
      “Nobody knows if the buyers’ faith in the market will last past next winter, when these construction projects would be finished”, says sales director Markku Koivu of Skanska Homes.
      Only after the summer’s holiday season will the building firms determine which projects they will start marketing in advance. “Before we give a go-ahead to a project, half of the dwellings have to be reserved”, Koivu says.
      Other companies adhere to much the same principle.
     
During the first part of 2009 the construction of only 360 new dwellings was commenced in Helsinki. Most of these will be rental flats.
      The number is feared to fall below the figures during the recession of the 1990s, City of Helsinki Urban Facts reports.
      In the early months of 2009 just over 500 non-subsidised new homes were completed. The building of around 2,600 dwellings is still under way.
      Deputy Mayor Penttilä calls for boldness from the construction firms to launch new projects, because the piecework rates have clearly come down.


Previously in HS International Edition:
  All Finnish banks have raised marginal cost of housing loans this autumn (7.11.2008)
  Upward trend in Helsinki housing prices is stalling (7.2.2008)
  Many new luxury apartments in Helsinki still unsold (7.1.2008)

See also:
  Housing prices continue to rise, number of sales decline (1.8.2006)
  Helsinki housing prices reach levels equivalent to pre-recession bubble (5.9.2005)
  Shortage of rental apartments looming in Greater Helsinki area (21.8.2007)

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