What is wrong with the Finnish housing market?!

Look at this. The three biggest influences on Finnish inflation are all related to housing (subsidized housing rent increases, maintenance fees and general rent increases). Rent increases far outstrip the growth of the CPI.

At a moment when the housing market is weak at best, and in all likelyhood in decline in many parts of Finland, it is really strange to see such big rent increases.

The only reason I have come uo with has to do with the state of finance and interest in Finland and Europe. Michael Hudson states that rent is for paying interest, but with interest virtually at zero, rent is maybe for getting yield instead. In a different way, the decline in housing prices in combination with mortgages at a higher price level leaves a gap for ‘investors’ which must be covered if they want to break even. On the other hand, this may not be the same for private persons who are forced to keep two mortgages due to moving-after-work. Or maybe it is.

Also the European Commission has pondered the Finnish housing market, by the way. I can not really comment on that; they have a point that as long as interest rates stay low, private indebtedness is not a problem. But perhaps what we see in Finland is a reallignment of real estate prices and rents. Who knows. In 2005 the OECD concluded that Finnish rents were below a ‘desired’ level.

This article gives a clue, perhaps: imputed rents and capital gains on permanent homes are untaxed. I am not sure how these are defined/calculated, but I suppose this is a way to achieve some kind of yield this era of low yield. But I am inclined to lend some credulity to the effects of low interest rates rather than to ‘supply and demand.’


One response to “What is wrong with the Finnish housing market?!

  1. Pingback: Once more: inflation in Finland, labour market relations and wage moderation | Arjen polku

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