Finland has passed the peak of the housing market and declining demand has resulted in weaker price growth, according to the OP Financial Group.
In an outlook issued on Wednesday, OP economists said they anticipate recession will prompt housing prices in Finland to fall by an average of one to three percent next year.
The bank noted that housing markets were still lively at the beginning of this year, "even if they cooled markedly in the spring from last year’s frenetic levels of activity." It said that there was a clear slowdown in housing markets over the summer, but that average home prices were still higher than last year.
According to the bank, interest rate hikes and weakened economic growth will pull down housing prices next year.
"Persistently high inflation will significantly reduce real housing prices both this and next year," the bank said in its statement.
During the second quarter, the prices of occupant-owned apartments rose by 1.7 percent compared to Q2 of last year.
"Home price swings in the Helsinki Metropolitan Area and Helsinki itself have tended to be larger, in both directions, than elsewhere in Finland. When prices fall, they fall further in the Helsinki Metropolitan Area than in Finland on average. On the other hand, when prices rise, they rise further there than elsewhere. This seems to be the case on this occasion too," said Joona Widgrén, an OP Financial Group economist.
"Buyers are hesitating due to rising interest rates and expenses. Of course, the rise in living costs is also directly affecting buyers’ ability to pay," Widgrén explained in the statement.
Inflation slightly down in August
The year-on-year change in consumer prices was 7.6 percent in August, according to Statistics Finland. In July, the inflation rate was a bit higher at 7.8 percent.
Among other factors, the number-crunching agency attributed the slight drop to a less severe rise in petrol prices.
Prices in August were mostly raised by cost increases for energy, including electricity, petrol, diesel and home repairs.
Conversely, price levels were curbed, year-on-year, by cost cuts for refundable and non-refundable prescription medications, Statistics Finland reported on Wednesday.
The agency said that the inflation rate across the EU was 9.1 percent in August, while it was 8.9 percent in July.