Valtteri Varpela
The collapse of housing prices teaches us that saving and investing must be done with a long perspective, not with the “everything for me right away” attitude, which we already got used to, writes Iltalehti news editor Valtteri Varpela.
Many people don’t realize that the benefit of lower house prices is greater for the person changing the house than the harm caused by the decrease in the value of their own house for sale. Antti Nikkanen
An acquaintance of mine, who was looking for a family apartment in a certain residential area in Helsinki, was saddened by the small number of apartments available for public sale online. He went to join the Facebook group of the residential area in question, on whose wall he posted a message saying that he was looking for an apartment for his family in the area. The message was followed by quite a surprise.
He received more contacts in private messages about properties for sale than there were for public sale from that area on Finland’s largest websites.
The phenomenon concretely tells about two things. First of all, it tells about a dam that is waiting to be broken: even though the housing market is deadlocked, people’s need to change their housing has remained unchanged.
Secondly, it shows that many people who are changing apartments seem to think only about the amount they can get from their own home – and should not put their apartment up for sale during a quieter period. Many people don’t realize that even if you get less for your own apartment than a couple of years ago, the apartment you’re changing to is likely to be cheaper as well. What is decisive is the separation of these.
According to the housing market analysis done by OP, changing the apartment to a bigger one would be cheaper now than in recent years. The benefit of lower prices is therefore greater than the harm caused by the decrease in the value of your own apartment for sale.
According to OP, especially in growing urban areas, the value of apartments can be expected to rise in the future as well. Even if you sometimes get more from your current apartment in a couple of years, the value of the new, larger apartment will also increase. It may also be the case that in a couple of years it may be much more difficult to catch up financially with that bigger one.
Ari Pauna, CEO of housing lender Hypo, has spoken of 2024 as “year zero” for the housing market: the economy begins to gain ground under its feet after uncertain times and growth begins, which will materialize in the following years.
First, trade volumes start to recover, then prices, and lastly new production, which has completely gone haywire. The sharp spike in interest rates has already been experienced, and it is coming down slowly but surely, and the interest rate is no longer the biggest drag on the housing market.
The most relevant question mark is now the future of the home buyer’s and seller’s own employment and cash flow. Comparable domestic inflation is also falling rapidly, and salary increases have been received. However, the next labor market round will be difficult.
Finnish mortgage borrowers were allowed to live for more than ten years in an extraordinary world of zero interest rates, where a crazy housing investment boom was built on corporate loans. Then many people’s eyes were opened in a harsh way.
According to various estimates, 80–90 percent of private landlords live in either debt-free or debt-free owner-occupied housing and have also invested in investment properties. For at least some of these people, the last couple of years must have taught them that it’s not a good idea to throw all your assets and debts into the same basket, the “wall”.
The most important thing is to think about where to buy those “walls”, how to finance that purchase, and how you could save or invest money in other things, especially in the stock market, alongside the purchase.
The collapse of housing prices also teaches in a blunt way that saving and investing must be done with a really long perspective. Before the collapse, the incredible quick profits of ten or even more than a hundred thousand euros in a few years were not an automatic machine that could be ridden indefinitely. But still, everyone should remember that after the big crash of the 1990s, housing price trends have never been in the red for many years.
Reducing the debt of an owner-occupied apartment located on your own plot in the city will certainly continue to be a smart way to save for yourself.
A mortgage debtor should hope that Prime Minister Petteri Orpo (kok) succeeds in his job as well as possible. The housing market can be said to be dependent on three factors: Finland’s credit rating, employment and compensation management.
Of these, the Orpo board’s most important task is to be able to maintain the Finnish government’s credit rating at least at the current level. Since 2016, Finland has belonged to the second best classification AA+. Last February, the credit rating agency Fitch pointed out that Finland’s problem areas are a higher debt ratio than other countries in the AA+ category and weak prospects for economic growth.
If Finland’s rating deteriorates, the cost of financing for all Finnish companies and banks will rise. As a result, every Finnish mortgage debtor has to pay an even higher price for the financing and services they take from the bank.
And what happened to my acquaintance who was offered several secret real estate gems that were not for public sale? He can’t do anything but wait to get his own apartment sold in Uusimaa, where the family fled the top prices in Helsinki during the corona era.
It remains to be seen how much moving to a cheaper area will cost in the end. In the area of the current home, the marketing time of Etuovi.com’s sales announcement is more than three times compared to the area where the family would now like to move.
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