Home prices will fall faster than previously anticipated this year and the rising interest rates decreased the regional differences in the housing market, according to housing market review by OP Financial Group.
OP economists have lowered their forecast on the development of home prices since the weak first part of the year, said OP in a press release on Friday.
The prices of owner apartments are now anticipated to decrease by 1.5 per cent on average, while in January, the forecast was that prices would decrease by 1 per cent.
Towards the end of the year, OP economists expect both the prices and sales volumes to slightly increase.
“Those waiting for an upturn in the housing market need to be patient. However, we still believe that a slight positive turn will already be seen at the end of this year. Decreasing interest rates are without doubt the most important driver for a turn in the price development, while the growth of households’ income also supports the change,” said Joona Widgrén, Senior Economist at OP Financial Group.
The end of last year was boosted by first-time home buyers who were active with home purchases before the end of the transfer tax exemption at the turn of the year. However, from January to March, the number of owner apartment sales decreased by 12.4 per cent from the first part of last year, which was itself a slow period.
The development of home prices has also been weak. During the first quarter, the prices of owner apartments fell by 5.1 per cent from the year before.
The decrease from the highest prices in the summer of 2022 is now already 10 per cent. In the Helsinki Metropolitan Area, the decrease has been even faster. The prices have fallen from the highest prices in the summer of 2022 by as much as 13 per cent.
“The sluggish situation in the housing market has continued early this year. The price development that turned out to be slightly weaker than anticipated is at least in part explained by the fact that expectations of interest rate reduction are now more moderate than at the end of last year,” Widgrén said.
There will be a clearer rise in both sales volumes and prices next year. Economists predict that the prices of owner apartments will increase by 2 per cent next year. However, reaching the previous top level will take several years.
In their recent housing market review, OP economists analysed how the development of interest rates has affected the regional divergence of the housing market.
The housing market in Finland has diverged strongly in this millennium, especially after the financial crisis, through to the Covid-19 crisis.
The regional divergence has been driven by population development, for example. The decreasing interest level seems to have a connection with the accelerating divergence as well.
“During the long decreasing trend in the interest rates, it was observed that differences in home prices grew rapidly. Now, with rising interest rates, a turn in this development has taken place, with prices decreasing fastest in larger cities,” Widgrén said.
Source: www.dailyfinland.fi
As the housing market review by OP Financial Group indicates, the decrease in home prices this year is accelerating due to rising interest rates. It’s interesting to see how the regional differences in the market are leveling out. It seems like patience is key for those expecting a market upturn, although a positive change might be on the horizon by the end of the year. Decreasing interest rates play a crucial role in price development, along with the growth in households’ income. Overall, it’s a challenging time for both buyers and sellers, but there could be light at the end of the tunnel soon.
Do you think the decrease in interest rates will have a major impact on the housing market as predicted by OP Financial Group?
Yes, I believe that the decrease in interest rates will indeed have a significant impact on the housing market. OP Financial Group’s forecast suggests that decreasing interest rates are a key driver for a potential turnaround in home price development. So it’s likely that we will see some positive changes towards the end of the year.
As a homeowner myself, I find the forecast quite concerning. It’s disheartening to see the continual decrease in home prices, especially with the rising interest rates. I agree with the economists that patience is key for those waiting for a market upturn, but it’s still worrying to witness these trends. Let’s hope for a positive turn by the end of the year as suggested by Joona Widgrén, Senior Economist at OP Financial Group.
As an experienced real estate investor, I agree with the forecast that home prices will continue to fall this year. The impact of rising interest rates is undeniable, causing a more uniform trend in the housing market across regions. It’s essential for potential buyers to remain cautious and patient amidst these fluctuations. Looking forward to a possible positive turn towards the end of the year, driven by decreasing interest rates and improved household income. Joona Widgrén’s insights from OP Financial Group resonate with my own observations.