Rising interest rates and economic uncertainty have led to a cooling of the housing market in Helsinki. Although transaction volumes have decreased, new apartments are still being completed in Helsinki. This increases the supply in the market at a time when demand is already declining. Combined with consumer uncertainty about their own and the surrounding economy, this has resulted in clear declines in housing prices in many areas. Marketing and sales periods have also lengthened, causing desperation among both sellers and real estate agents. This spring alone, several significant players have gone bankrupt.
Overall, the housing market in Helsinki is facing challenges due to rising interest rates, declining transaction volumes, and ongoing completion of new housing units. It is important to monitor the market's development and understand how these factors impact decisions in real estate transactions. Buyers should exercise caution, carefully research alternatives, and consider the advice of experts when making decisions about buying property in Helsinki. On the other hand, price flexibility in both directions is a sign of a functioning market economy and can provide opportunities for both first-time homebuyers and investors.
The risks arising from construction company bankruptcies.
Although the housing market faces challenges, it is important to keep in mind that markets are constantly changing. New apartments are being completed because construction projects were started before the extent of the problems became apparent. Slower growth can be expected in these new developments by at least the fall. The dynamic nature of the market allows for the situation to improve and the imbalance to stabilize. This requires flexibility and the ability to adapt to changing circumstances. Monitoring the housing market and continuous learning help us better understand the market's development.
There are also concerns related to new developments and their significant share of housing association loans. In Finland, we will likely continue to see construction company bankruptcies. In a situation where a bankrupt construction company still owns a significant portion of the newly built apartment shares, existing neighbors who have already purchased their apartments can face real problems. There are already deals being offered where buyers can live in the new development for the first two years for free, meaning that the seller covers not only the mortgage payments but also all the association fees and other expenses during the first two years.
This high risk/high reward situation certainly offers opportunities, but I see it as a concerning signal from the market. There is a risk associated with the financial stability of neighbors in new developments. One way to protect oneself in the housing market is to focus on residential areas where there is no more room for new developments. Such areas include many postal code areas in the city center and the Kallio district. Although the price per square meter in these areas is among the highest in Helsinki, and the potential for value appreciation may be weaker, they can be considered safe harbors in terms of value development.
While the housing market in Helsinki is currently in a challenging situation, it is important to remember that the situation is not permanent. Staying informed about market developments and being prepared to seize future opportunities is crucial. Continuous learning and the support of experts help us make informed decisions in real estate transactions and capitalize on market changes. Although prices may be declining across the entire metropolitan area now, the more central the location, the more likely the value will return to its previous level and potentially reach new peaks in the future.
Case: Trapped Between Two Properties
One example of a traditionally problematic situation is being trapped between two properties, where a new property has already been purchased but it is challenging to sell the old one. In such a scenario, the new property may offer, for instance, a one-year mortgage payment holiday, which can cause anxiety and fear for the owner when it comes to its expiration. What should one do if the property cannot be sold or if the market value has dropped significantly, making it unwise to sell at a loss? One option is to rent out the old home for a few years. By aiming for a rental price that covers the costs or minimizes the loss, this can easily lead to a workable solution.
Over the years, many of my clients have entered the rental market precisely in the manner described, such as when moving to a larger apartment instead of selling their first home. The situation described above naturally requires negotiation skills with the bank and a strong personal cash flow, but it is entirely achievable.