New apartment sales remain low in Finland, signs of market recovery emerge

By admin On Nov 26, 2024

The Meri-Toppila residential area in Oulu on 22 October 2024. LEHTIKUVA

New apartment sales in Finland remained sluggish through October 2024, according to the Real Estate Agency Federation of Finland (KVKL). Sales volumes, already at historically low levels, declined further compared to the previous year.

Tuomas Viljamaa, CEO of KVKL, described the situation as grim. He noted that monthly sales of new apartments have hovered around 200 this year.

This contrasts sharply with 2020 and 2021, when sales reached up to 1,000 units per month.

The gap between the prices of new and used apartments has widened significantly, discouraging buyers from opting for new properties, said Viljamaa. Buyers have increasingly favoured used apartments, which offer more square metres for the price.

However, Viljamaa pointed to a shift in the housing market. Prices for used apartments began to rise more noticeably in October, narrowing the price gap. Lower interest rates and a reduced property transfer tax have provided additional support for the market.

The inventory of unsold new apartments has been shrinking since spring, helping stabilise the market. This year, fewer than 20,000 new apartments are expected to begin construction. By comparison, annual starts exceeded 35,000 between 2016 and 2022 and surpassed 45,000 during peak years.

Population growth has been outpaced by the rapid rate of housing production in recent years. Between 2016 and 2022, approximately 35,000 more apartments were started in the Helsinki region than there were new households. The average household size in Helsinki in 2023 was 1.84 persons per dwelling.

Viljamaa noted that the challenges in recent years stem partly from excessive housing production during 2016–2022. He criticised state-supported ARA housing production during this period, which further intensified the overheated market.

Of the fewer than 20,000 housing starts expected in 2024, over half will be state-subsidised ARA housing. The availability of privately financed owner-occupied apartments remains extremely limited. While there have been some positive announcements of new projects starting, these units will not be ready until at least 2026.

Demand for larger family apartments in growing urban areas is likely to rise, leading to potential price increases in these locations, predicted Viljamaa. Some real estate investors appear to have anticipated this trend, as loans for investment properties have grown at a higher rate this autumn than loans for owner-occupied housing.

From January to October, a total of 1,619 new apartments were sold nationwide, down 12.5% from the same period in 2023, when 1,850 units were sold. Compared to the five-year average, sales dropped by 75.4%. KVKL’s price monitoring service, which tracks about 35% of all new apartment sales, provided these figures.

The second quarter of 2024 saw the highest number of sales at 519 units, representing a 6.8% decline year-on-year. Sales in the first quarter totalled 452 units, down 18.3%, while third-quarter sales reached 449 units, a 15.1% decrease.

The Helsinki metropolitan area accounted for 648 sales, a drop of 33.9% from the previous year. Surrounding municipalities saw a sharper decline of 48.8%, with only 44 units sold. Elsewhere in Finland, 927 units were sold, a reduction of 27.6%. Sales in other regions made up 57.3% of the total, compared to 40.0% for the metropolitan area and 2.7% for surrounding municipalities.

Among major cities, Espoo led new apartment sales with 257 units, a 59.6% increase from 2023. Helsinki followed with 252 units, up 50.9%. Tampere recorded 178 sales, a 13.6% drop, while Vantaa saw 139 sales, down 10.9%. Turku experienced the steepest decline, with sales falling by 54.2% to 76 units.

Of the new apartments sold between January and October, 1,244 were flats, a 7.0% decrease year-on-year. Row houses accounted for 300 units, down 21.3%, while detached houses totalled 75 units, a decline of 42.7%. Sales of flats with three or more rooms outpaced those of smaller units, particularly in the second quarter.

Median prices per square metre for new flats increased slightly in the third quarter, particularly in the Helsinki metropolitan area and its surrounding municipalities. The median price in the metropolitan area was €6,689, influenced by high-end properties, which accounted for around 10% of sales in July–September. In surrounding municipalities, sales volumes were too small for reliable comparisons.

Source: www.helsinkitimes.fi