THE FAILURE from the coronavirus pandemic will cool housing markets in the Nordic countries, Danske Bank predicts.
Housing prices have risen rapidly across the region over the past year as people have sought homes with more space for remote work, study and free-time activities – up to 18 % in Denmark and Sweden, 11% in Norway, and almost five percent in Finland.
“People were looking for more spacious homes when the supply was coincidentally lower. We expect that the opening of societies will push household consumption of housing into other areas, which will slow down the rise in prices ”, Las Olsen, the chief economist of Danske Bank, commented Friday.
Authorities in the Nordic countries should also strengthen regulation in housing markets. The Finnish government plans to cap total household debt at 450 or 500% of annual gross, a move that appears to have had an impact on house prices in Norway, according to Pasi Kuoppamäki, chief economist at Danske Bank Finland.
“Although banks have a 10% flexibility reserve on new loans, regulations appear to have slowed price increases in Norway. The debt ceiling seems to have had an impact especially in regions where prices have risen rapidly, such as Oslo, ”he said.
The debt ceiling could have a similar impact in Finland, given Jussi Pajala, the Managing Director of Nordea Mortgage Bank.
“There has been talk that the debt ceiling could limit the evolution of house prices, but it is not excluded that it could lead to a reverse trend, a bear market. It would not have good consequences ”, he declared. quoted as saying at a press conference Friday by Helsingin Sanomat.
Pajala also believed that the cap could inhibit labor mobility and undermine opportunities for younger generations to accumulate wealth.
Nordea released its latest forecast for the Finnish housing market on Friday, believing that sustained demand in the market will create pressure for further price increases in the second half of the year. The number of transactions on the market has increased considerably since last spring, currently approaching 7,000 per month against 5,000 to 5,500 before the pandemic.
“The number of sales is exceptionally high”, confirmed Juho kostiainen, economist at Nordea. “Sales were previously strong in the capital region and other growth centers, but are now good in other parts of Finland as well.
Data from Statistics Finland suggests that demand will remain high. His consumer confidence index last month revealed that nearly 17% of consumers plan to buy a home next year.
Demand has mainly been directed towards single-family homes. The resulting price increases were substantial, of around 15%, in Hyvinkää, Järvenpää, Kerava and Nurmijärvi.
“The rise in the prices of single-family homes is a new phenomenon because these prices have been stable for 10 years,” noted Kostiainen. “People are looking for a space a little further away from the centers of growth. This does not mean that growth poles are losing their appeal, but simply that migratory flows will spread over larger areas around the poles.
Aleksi Teivainen – HT