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Inflation, interest rate hikes cause housing price drop, Land Survey says

Housing prices in Kainuu dropped by as much as 20 percent over the past year, while Åland and Ostrobothnia saw increases of up to 15 percent. 

Ilmakuva pientaloalueesta.
Single-family home sales have returned to 2019 levels after a couple of peak years spurred by Covid. Image: Antti Aimo-Koivisto / Lehtikuva
Yle News

The prices of single-family houses have fallen by up to 20 percent in some parts of Finland, year-on-year, a situation that's being attributed to interest rate hikes and inflation.

According to real estate statistics published by the National Land Survey of Finland on Thursday, mean prices have fallen most in Kainuu, Kymenlaakso and North Savo. Meanwhile, Åland and Ostrobothnia have recorded increases up to fifteen percent.

Sales volumes fell by 17 percent across the whole country while the overall average price fell by two percent.

"In 2020 and 2021, single-family home sales were very hot due to the pandemic price hike, making for a very exceptional year for real estate sales at the time. Now we are back to 2019 levels, which means a 17 percent drop in single-family home sales in the first half of the year," Chief Registry Officer Saara Saari from the National Land Survey told Yle.

According to Saari, the return to 2019 levels is mainly due to accelerated inflation and interest rate hikes.

Cottage boom comes to an end

The Covid pandemic triggered a boom in the summer cottage market in 2020 and such sales were brisk until this year.

Just below 2,200 cottages were sold during from January to September of this year, marking a drop of 27 percent compared to 2021.

"Sales volumes have levelled off to the levels of previous years after an exceptionally busy period of holiday cottage purchases in 2020 and 2021," Saari pointed out.

Despite this, the nationwide price for cottages dipped by only one percent, though it dropped by 11 percent in Uusimaa and Päijät-Häme in the past year.

"The most obvious effect on the leisure housing sector is the inflationary trend that has been triggered by rising fuel, energy and raw material prices and the subsequent rise in interest rates. This is only natural, as the purchase of a cottage is only considered when the housing situation is in order," Saari said.

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