Tag Archives: Helsinki

Is the Helsinki housing market like the Dutch housing market?

I am wondering about that. I am not an expert on housing policies, and only to some extent are tax rules on deduction of interest in mortgage similar in Finland and the Netherlands, but consider these similarities:

– space constrained: the Netherlands is a small country in which physical space is very much constrained for building real estate, in particular in the West. Helsinki is similarly space constrained: on one side is the sea, on the other sides there are other municipalities. As in the Netherlands, Helsinki has a few areas of nature which the locals value very much for their intrinsic value and recreation, which leads to resistance to their ‘development’ (see here).

– Helsinki experiences an influx of people from elsewhere in the country (see the last graph in this post), much like the West of the Netherlands (by and large)

– Helsinki, like parts of many cities in the Netherlands, has especially in the inner city lots of buildings which are especially valued for their location, style or age (think pre-1960s flats and especially the 1930s Jugendstil buildings). Many of these are, in addition to normal residental use, in use by companies, which pushes their value up, I guess.

 

One of the problems in Helsinki, which is incidentally also the big problem in the Netherlands, is that there are not enough suitable houses/apartments for so-called starters, i.e. first-time buyers (young people). Or put in another way – there are too few of them or they are simply too expensive. Because of the space constraints new such residencies are built in locations where young people may not necessarily want to to live as a first choice (i.e. far from the center).

 

Taking into account that the Netherlands and Finland (/Helsinki) are experiencing housing bubbles (which are now deflating in all likelihood, at least in the Netherlands), what would be sensible steps to make the housing markets in the Netherlands and Helsinki work better?

Finnish real estate bubble?

As Edward Hugh stated on his Facebook page on the 14th of February (can’t link that, so please look it up):

The depth of Finland’s recession may raise an eyebrow or two here and there. It was meant to be a very competitive economy. I have long felt, studying the evolution of the trade balance, that it had more to do with the periphery than the core. The economy has been supported by a housing boom, but now that appears to be coming to an end. Not so different from Denmark, or the Netherlands.

As I blogged, I have shown some Eurostat statistics on housing price developments, which I thought did not look like a boom. But now I found statistics from Statistics Finland on square meter prices in various regions of Finland, and they tell something I suspected but could not put in a graph, until now. Please note that the first graph is a combination of two time series (2000-2008 and 2005-2012) which use a slightly different methodology (mainly, the latter has much more indicators on which it measures price).[UPDATE: A commenter has longer range graphs on housing prices in the Nordic countries, which make the pattern even more clearer] The picture looks a lot like the Netherlands – a slow bubble, starting in the 1990s. As for the latter graph, Helsinki 1 is basically downtown, prime, Helsinki, while Helsinki 3 is more of a peripheral area, although public transport connections are very good. Vantaa is (traditionally) a more working class city next to Helsinki, where also the Finnish main airport is located.

Source: Statistics Finland

Source: Statistics Finland

And for the capital region:

Source: Statistics Finland

Source: Statistics Finland

I don’t know how to define a housing bubble, but it seems that Helsinki prices, especially in prime and other near-center Helsinki (this holds true also for 2-room appartments and bigger) have gone up quite a bit. That has to do partly with this:

Source: Tilastokeskus

Source: Tilastokeskus

Although Tampere and Oulu are also growth centers in a sense, the Helsinki region has a much greater pull. I don’t have time now to dissect the nature of those moving to Helsinki (age, gender, where they come from) but from what I know anectdotally, there is quite a shortage of appartments for people who need only a single or double-room appartment, mainly because they are so expensive (for students etc.)

I don’t know if this is part of the possible bubble-story but it seems to happen mainly in the Helsinki area, not elsewhere.