Danske Bank predicts house prices will rise next year

Danske Bank has slightly revised its forecast for the change in house prices for the current and next year. The bank now estimates that some of this year’s price increase will be carried over to next year.

Danske Bank predicts house prices will remain unchanged this year. Next year, the bank predicts that apartment prices will rise by 3.5 percent.

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– Sales of new apartments have shrunk more sharply than sales of used apartments. Rising interest rates continue to weigh on the housing market, new apartment builds are high, and consumers’ intentions to buy apartments are now low. As benchmark interest rates for mortgages continue to fall and rising incomes boost purchasing power, the conditions for a boom in home sales will improve. Stagnant demand will gradually begin to move, says Danske Bank’s chief economist Algae becomes a waste Bulletin.

The number of apartment deals is roughly a quarter below the average level of previous years. According to preliminary data from Statistics Finland, prices of older shared apartments fell 5.1 percent from a year ago and 1.5 percent from the previous quarter in the first quarter of the year. However, on a monthly basis, home sales rose from a low in January, and late spring home sales are already more upbeat than a year ago.

– Now investors also seem to be gradually returning to the market. According to the Bank of Finland, new investment housing loans were taken out 14 percent higher in March-April than last year. Significantly less money was withdrawn than in previous years.

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Weak demand, increased construction costs and increased interest rates have pushed home construction into a significant decline, which will last until 2024. The stock of unsold new homes will rise temporarily, weighing on the price level and reducing the incentive for additional construction this year.

– However, Finland’s population continues to grow and more apartments are needed in development centers, so under-construction will eventually lead to a housing shortage. The release of pent-up demand boosts demand for new construction in the second half of the year, but due to the time required for permit applications and other construction processes, home production may not rise significantly until next year.

At the end of May, Danske Bank changed its forecast of future interest rate cuts by the ECB. After the interest rate cut seen in June, Danske Bank expects the ECB to cut interest rates only in December. In 2025, the ECB is expected to implement three interest rate cuts. Stubborn inflation may delay interest rate cuts.

If the ECB acts as forecast, the one-year Euribor will fall below three percent next spring. Short-term Euribor rates will fall more slowly than this – depending on if and when interest rate cuts happen.

– The increase in interest rates is strongly felt in the Finnish economy in 2023, and the effect can be seen as late as 2024, but the reference interest rates of many mortgages are updated gradually lower than a year ago. Falling interest rates ease the situation for borrowers and support consumption prospects and the housing market this year and next. Kuoppamaki says there are signs of a turnaround in the housing market.

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