This year, Finland will see the biggest drop in property prices since 1993, according to a housing market review published on Friday by the Mortgage Society of Finland Hypo.
The report by the home financing specialists found that prices will fall by an average of seven percent across the country through 2023, and by eight percent in the Greater Helsinki area.
This means a return to 2016 price levels for the country overall, and to 2019 levels for the capital region.
The price drops are a combination of different factors, including the rise in interest rates, a plentiful supply of new housing and the impact that economic uncertainty is having on demand.
The property market downturn is also hitting state coffers, with Hypo anticipating that the revenue from real estate transfer taxes will drop by some 200 million euros this year.
Hypo's review added that the situation is a good opportunity for first-time buyers.
"There is now an abundance of housing available, giving home-seekers an excellent opportunity to negotiate prices," the report stated.
Hypo also had some reassuring advice for sellers, noting that if someone has to sell their current home for less than the purchase price, they can now afford a larger home for less money.
Moderate rise in prices expected
In its report, Hypo said it expects prices to start rising moderately towards the end of the year, but this turnaround will depend on an increase in demand.
"Rising demand, a sharply declining number of new construction projects being completed, and a moderating interest rate trend will support property prices next year," the forecast said.
The supply of housing will contract next year for cyclical reasons, Hypo predicted, adding that interest rates will settle and prices will rise again in bigger cities.
Next year, property prices are expected to rise by two percent, while interest rates could also start to fall as inflation eases.
However, Russia's ongoing war in Ukraine creates significant uncertainty for the future direction of interest rates.
Hypo further noted that a possible Western-backed reconstruction of Ukraine would put pressure on interest rates to rise in response to investment and new economic growth.
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