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According to data from the Real Estate Federation's Price Monitoring Service, the Finnish housing market has faced serious problems in 2023, with a noticeable decline in sales. The number of real estate transactions fell to 50,935, 24.5% down from 2022's 67,500 sales in 2022. This decline has marked a difficult period for the real estate industry.
The key driver of this decline was the sharp fall in home buying intentions in the summer of 2022, primarily due to changes in the interest rate policy of the European Central Bank. The 12-month Euribor rate, usually linked to Finnish mortgages, turned positive in April 2022 for the first time after a long period of negative interest rates.
This shift led to a rapid rise in market interest rates, peaking at 4.228% on September 29, 2023. Finland, being particularly sensitive to changes in interest rates due to the prevalence of variable-rate mortgages, has felt these changes acutely in the housing market.
However, the silver lining was that as interest rates began to fall, the situation for Finnish homeowners improved relatively quickly.
The slowdown in housing transactions has led to a significant decline in construction activity. While many housing projects started during the era of zero interest rates were completed by the end of 2023, the number of newly built homes sold through real estate agents has fallen sharply from 5,894 in 2022 to just 2,160 in 2023.
In response to the economic situation, the government has made several key changes at the end of 2023. The housing market saw significant growth from the removal of the transfer tax exemption for first-time homebuyers, as well as a reduction of transfer taxes on apartments and detached houses. These changes have led to increased market activity towards the end of the year, especially among first-time buyers.
Another important decision was the Financial Supervisory Authority's restoration of the home loan cap to its original level of 90% in December 2023, which was reduced to 85% in 2021. The move gave households and banks greater flexibility in obtaining and issuing mortgages.
The housing market is expected to recover in 2024, potentially growing by about 15% compared to 2023. The demand for large family homes is particularly strong, while the market faces a mismatch with an abundance of smaller homes. The growing population of urban areas and a shift in housing prices are likely to stimulate the market further.
Source: Helsinki Times
Photo by Tapio Haaja on Unsplash
