Home prices likely to rise 3% this year: OP

OP Financial Group’s economists are raising their forecasts for growth in home prices, said OP in a press release.

In early 2021, they predicted that prices of old owner apartments would increase in Finland by 2 per cent on average this year. The new estimate is between 3 and 3.5 per cent.

For the first time, they are implementing a new regional division based on historical price development, which will allow easier monitoring of regional development.

The coronavirus pandemic and ensuing restrictions have had a negative impact on many sectors, but a twofold effect on the housing market.

Sales volumes have recovered from last spring’s collapse, and business is booming. Despite the financial crisis, average prices have increased across the country. However, price trends continue to show signs of regional segregation.

“The trend is the same on the international housing market. While the coronavirus pandemic has been a global phenomenon, average home prices have increased across Europe. Ireland is the only country where home prices have slightly decreased, but prices have grown throughout the rest of Europe,” said OP Financial Group economist Joona Widgrén.

Last year, home prices increased in growth centres by 3.5 per cent on average. Prices decreased by approximately one per cent in areas classified as stable, and by more than two per cent in areas classified as decreasing.

“Segregation of the housing market has been apparent for several years. There is now exceptionally keen interest in prices and regional differences. Our new classification will make it easier to monitor the regional development of home prices in the future. Being based on statistical information, the classification method may change over time,” Widgrén added.

OP Financial Group’s economists see various reasons for strong price development in growth centres. Many people have switched to remote work due to the pandemic and are seeking larger homes.

Households unaffected by unemployment have accrued savings. Generally speaking, economic policy has been accommodating, and the development of capital markets good.