Finland's housing loan specialist Hypo says that there may be turbulence ahead for the housing market for the first time in years. In its latest quarterly report on the market, Hypo says that the arrival of large numbers of foreign investors has added an element of instability that is likely to persist, especially if the building companies take on debt at the behest of investors.
International investment funds have purchased thousands of properties in Finland, bringing the risk that if profitability dips, they could withdraw from the Finnish market.
According to Hypo, the low birth rate has reduced the need for larger, family apartments and the number of property sales has dropped permanently as a result.
Investors risky for buildings
Hypo believes that ordinary owner-occupiers who hold shares in building companies (a Finnish form of property ownership whereby shareholders own part of the company that owns the building in which their flat is located) could face additional risk if there are many investors clustered in the same building.
The lender recommends that owner-occupiers ascertain the ownership structure of any housing company before they buy shares in it. If investors hold a majority of shares, then risks for owner-occupiers increase.
"If the building company's shareholders are mainly investors, especially investment funds, the risks and any possible renovation borrowing is more expensive," states the Hypo report.
The company suggests that some building companies could end up holding the debt if investment funds and investors can't make the payments on jointly held debt. Investors prefer to borrow through the housing company rather than directly fund their purchase themselves, as that arrangement is treated favourably by tax authorities.
This week Nordea called for a cap on housing company loans in Finland, citing the possible risks to the housing market.