A positive mood returned to the housing market towards the end of the year after a long period of negativity. In Uusimaa, people made approximately 21 per cent more housing transactions compared to the same period in the previous year.

First-time home buyers were particularly active, because as of the start of January, they are no longer exempt from transfer tax.

However, the number of housing transactions decreased again after the turn of the year.

“First-time buyers typi­cally buy smaller apartments and later want to move to a bigger one. This can cause a chain reaction on the housing market, when home changers want to ensure that their old apartment is sold before they buy a new one,” says Joona Widgrén, Senior Economist at OP Financial Group.

At the start of the year, the transfer tax of housing companies and property companies decreased from 2 to 1.5 per cent, which may have a positive impact on the housing market. 

We expect the prices to increase faster than average in the capital region once the upturn in prices starts. 

“We have probably reached the bottom in terms of the number of apartment sold, but reco­very has not started yet. We expect apartment prices to decrease by approximately one per cent this year, but towards the end of the year, the prices might start to increase. The number of transactions is expected to slowly return to normal,” Widgrén says. 

“Normally, an upturn on the housing market is first seen in the number of transactions, and the increase of prices will start later. In 2025, the prices are expected to increase more clearly.”

Sharp fall in Uusimaa

The last couple of years have been gloomy on the Finnish housing market. Last year, the price of old dwellings in blocks of flats, which is a general indicator used on the housing market, decreased by 6.4 per cent year-on-year. The number of sales trans­actions fell by one quarter.

In Uusimaa, the fall was even sharper. For example, in the capital region and the neighbouring municipalities, prices decreased by 7.5–8 per cent.

“The prices have increased more in the capital region than in the rest of Finland, but we expect them to increase more as soon as the upturn starts,” Widgrén says.

Interest rates are decreasing

Factors that affect the hou­sing market the most are interest rates and the overall economic and employment situation. The most common interest rate for mortgages, the 12-month Euribor, was at its highest in October, at 4.2 per cent. In January, it decreased to 3.6 per cent.

“The market expectation is that the 12-month Euribor interest rate is at approximately 2.5 per cent at the end of the year, which would be significantly lower than last year.”

The deposit interest rate of the European Central Bank that guides the market rates, including the Euribor, was at 4.0 per cent at the beginning of February. It is expected to decrease this year. 

Although the 12-month Euribor was negative in 2016–2022, this is not normal over the long term.

“We expect the 12-month Euribor rate to vary between two and three per cent in the future, maybe closer to three.”

Indirect impact of crises

Although the global situation changed dramatically when Russia attacked on Ukraine, this had no direct impact on the Finnish hou­sing market. But the crises can have an indirect impact, if they weaken the economic outlook and increase inflation and interest rates in Finland.

The Finnish economy slipped into a moderate recession last year, and OP’s forecast for this year shows zero growth. The employment rate will decrease by 0.5 per cent but remain at a relatively good level. 

“No major changes in the employment market are expected, which is a good thing for the housing market. The inflation has slowed down and wages have increased, so the improved purchasing power will have a positive impact on the housing market,” Widgrén says.

Inflation was at its highest in December 2022, at 9.14 per cent, and one year later, it had decreased to 3.59 per cent. 

The European Central Bank’s target is an inflation rate of two per cent. The European inflation trends are closely linked to market interest rates: the lower the inflation, the lower the inte­rest rates.

“In the long term, apartment prices will follow the trends in the income levels,” Widgrén says.

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