The Russian attack could upset the Finnish housing market

Russia’s attack is a risk to economic growth, but economists say the collapse of real estate in Finland’s major cities is short-lived.

Until a few weeks ago, economists predicted that housing prices in Finland would rise by an average of 2.5 per cent this year. In January, OP Bank said that Finland was facing the biggest economic boom since the end of the 1980s. But geopolitical uncertainty is already being reflected in the housing market.

"The war increases uncertainty and dampens pre-war predictions," said Veera Holappaeconomist at Pellervo Economic Research PTT.

The war is also expected to affect Finland’s foreign trade. in four Finnish doing business in Russia is expected to be hit.

"Buying a home is a big purchase and a big decision in life. As uncertainty increases, people easily postpone making such decisions," explained the OP economist Joona Widgrén.

From Minna Kuusisto took a global view: heightened uncertainty is reducing companies’ willingness to invest, sanctions and counter-sanctions are restricting trade with Russia, employment is set back in some sectors, prices are rising and the global is slowing down.

"Rising prices reduce people’s purchasing power in Finland," Kuusisto pointed out.

This year’s strong economic growth and employment forecasts were expected to warm the Finnish housing market.

"The in economic growth means a more moderate wage increase, which in some places weakens employment prospects and naturally affects the housing market." explained Juhana Brotheruschief economist of the mortgage company Hypo.

However, Brotherus pointed out that the uncertainty would now only temporarily affect property prices. "Real estate is also stable in the face of a deteriorating economic outlook."

Central bankers have been ready to raise interest rates this spring, but an attack by Russia could change the situation. "Central banks never like uncertainty, and now we are facing something very uncertain," Six of Danske Bank said.

According to Brotherus, a delay in central rate hikes would make it easier for mortgage holders. "If the threat of interest rate hikes moves further into the future, it will offset some of the uncertainty caused by the war."

Last year, house prices in Finland rose by an average of four per cent. The real estate market was hot as banks broke records for mortgages issued.

The rapid rise in prices was due to the relatively low demand for large dwellings. People also had more to live in as leisure spending slowed during the .

Whether or not there is a temporary slowdown in real estate in Finland, economists said that urbanization in Finland will continue as real estate values ​​rise in urban centers.

In 2021, more than half of Finland’s new buildings were erected in the metropolitan area, Turku and .

Source: The Nordic Page

Related Posts