By promising to lower interest rates only in the summer, the European Central Bank is talking down the Finnish housing market.
Athose who sell sundaes and those who decide on monetary policy have found themselves in a mutual auction. The European Central Bank signals that key interest rates will not be lowered in the near future. According to central bankers, interest rates will probably be lowered in the summer, when there is a clear picture of wage developments in Europe. The latest slowdown in interest rate changes may be the price of energy, which is feared to rise due to the crises in the Middle East. If the price of oil rises, it will move to raise inflation, which has already started to fall in favor of lowering interest rates.
Property dealers in Finland assure that the trade is already picking up and prices may soon rise. Both parties engage in – in central bank terms – proactive communication. The message is contradictory: one will talk the Finnish housing market down, the other will try to talk it up. Those selling apartments are weak: there is no concrete evidence of an acceleration in sales after the spike caused by the tax change at the end of last year, and interest rates will not fall for years to the levels that Finns have time to get used to and measure their finances.
The problem is perhaps getting used to it. If the annual euribor is less than four percent, and banks in their mutual competition offer low margins, mortgages are not expensive. Yes, more expensive than a couple of years ago, but the trade freeze is an overreaction in Finland, which has a reasonably good employment rate.
Another big problem in the housing market is housing association loans. Apartment buyers are looking for well-managed housing associations and apartments in the buyer's market, which are not burdened with large housing association loans visible in the financing consideration. Banks also value this choice when granting loan decisions. The financial innovation of the past years, the housing association loan, became a risk for housing companies, apartment buyers and those building new housing stock after the interest rate world changed. Even if the risk is not large relative to the size of the market, it is widely reflected in the uncertain housing market.
The editorials are HS's positions on a current topic. The articles are prepared by HS's editorial department, and they reflect the magazine principle line.
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