Apartment prices are falling and rents are rising: PTT

Apartment prices are falling and rents are rising: PTT

However, there are no signs of an imbalance in the housing market that could lead to a downward spiral or pose a risk to the economy. At the end of the year, the housing market is expected to recover, but the average prices of old apartment buildings will decrease by 2.5% throughout the country.

“The bottom will be in the first half of the year, and prices will start to rise again in the second half of the year as the housing market recovers from the shock caused by the energy crisis and rising interest rates,” said the PTT economist. Veera Holappa.

According to the forecast, the bottom of household demand for housing is starting to show. When positive news starts to trickle out of the economy, the demand for apartment purchases is expected to release. The average 12-month Euribor rate is forecast at 3.5%, and energy prices are expected to return to their previous levels, down from last year’s peak.

This increases consumer confidence and apartment buying is expected to pick up in the spring, but the price level before the decline will not be reached in 2023. For example, in Helsinki, the prices of old apartment buildings are expected to fall by 3% and in Tampere they are expected to fall by 2%.

PTT’s forecast examines the development of old apartment building prices, market rents and ARA rents in the largest cities in 2023.

Economic uncertainty increases regional demand for rental apartments

As a counterweight to apartment prices, the rate of increase in rents is predicted to accelerate from last year. The demand for market-priced rental apartments increases in the first half of the year, but the pressure eases towards the end of the year as the housing market recovers again.

“Last year, due to the tight market situation, many landlords did not raise rents. Despite this, the increases are below the increase in costs, as there are still plenty of new apartments available in the first half of the year, so there is plenty of supply,” said Veera Holappa.

Nationally, rents for market-priced rental apartments are expected to rise by 2.3% during the year.

In recent years, the ratio of ARA rents to market-priced rents has remained fairly flat in different areas, but this year is an exception, as ARA rents are expected to rise by around 4%. These increases are still smaller than the increase in costs, which can, for example, delay renovations.

The biggest sources of uncertainty are external

In this year’s forecast, it has been especially determined whether there are internal risks in the Finnish housing market that could lead to a collapse and downward spiral of prices. However, there are no signs of such serious imbalances.

“There are no signs of a collapse in the housing market and it is not a source of economic instability. Although prices are falling, this development is not expected to lead to a negative spiral that would lower prices further,” according to PTT. CEO Markus Lahtinen.

Lahtinen adds that the biggest sources of uncertainty are external, because we don’t know what will happen, for example, with regard to the war in Ukraine.

HT

Source: The Nordic Page

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