Finland’s housing prices still have room to drop: OP Group

FINLAND’S housing market is yet to see the bottom, with no recovery in sight until the end of next year as a wobbly economy and higher borrowing costs weigh on the property market, OP Group said.

Finnish home prices are set for a drop of about 5 per cent to 7 per cent on average this year, said OP Group’s economist Joona Widgren in a new forecast. That entails house values declining “a little further” before bottoming out, he said, adding that it is easier to find “risks of a market decline than signs of a recovery”.

The residential property market in the Nordic country has held up better than in some of its peers. In Sweden, home values slid as much as 12 per cent to 13 per cent from a peak in early 2022 before stabilising in recent months. In the two neighbouring nations, the prevalence of variable interest rates has weighed on housing as fast increases in borrowing costs by central banks have fed through, making mortgages more expensive. 

The number of transactions has plummeted by about 20 per cent since last autumn, with no immediate signs of improvement in sight, OP Group said. Finnish home prices will remain flat in 2024 before starting to recover in 2025 at the pace of about 2.5 per cent gains, it said, adding that values will rise alongside an uptick in sales volumes.

The Finnish Financial Supervisory Authority warned last week of real estate risks to banks, as loans backed by residential and commercial property account for nearly 60 per cent of banks’ stock of household and corporate lending.