Nordea: Housing affordability in Finland near record high

4 juni 2009 A notable rise in housing affordability in Finland occurred in the first quarter of 2009. The nationwide index value stood at 32.4, in contrast to 40 in the last quarter of 2008. Lower housing prices and mortgage rates enhanced housing affordability. The average interest rate decreased from 4.9 per cent in the last quarter to 3.0 per cent. Housing affordability was lowest in Helsinki (45), where the drop was 12 index points, though. Best affordability was in Kajaani (22). The monthly loan servicing cost of a household in Helsinki fell by 195 euros from the previous quarter, now totalling 733 euros. The decline of the monthly cost of a household in Kajaani was 69 euros, amounting to 304 euros. Housing prices decreased slightly nationwide, with an average home price of 140,621 euros. The average for Helsinki is 221,875 euros, but the least expensive homes can be bought in Kajaani for 92,006 euros. - Regional differences have narrowed due to differing price development and a deeper fall in the Greater Helsinki Area. The last time the index was lower in Helsinki in 1996, and now that the monthly cost has come down by as much as 300 euros in six months we can state that housing affordability is near record high, says Tarja Svartström, Nordea's Private Economist. - In April the interest rate on new home loans had already decreased to a record-low 2.6 %. Since the introduction of the euro the average interest rate on home loans has stood at 4.4%, but due to the slight decline in housing prices and positive income development, housing affordability would be reasonable with the average interest rate, too. Short-term interest rates will remain low for a year, but borrowers should be aware that within the next ten years the interest rate level may be the same or even higher than thus far since introducing the euro, says economist Reijo Heiskanen. Monthly loan Index Index Home price servicing cost 4/2008 1/2009 Change Whole Finland 140,621 465 39.9 32.4 -7.5 Helsinki 221,875 733 56.9 45.0 -11.8 Espoo 197,606 653 47.1 37.6 -9.5 Porvoo 159,130 526 41.3 35.4 -5.9 Vantaa 166,426 550 44.4 36.8 -7.6 Tampere 146,150 483 40.8 33.1 -7.7 Hämeenlinna 121,498 402 35.4 29.5 -5.9 Kuopio 126,413 418 37.2 30.7 -6.5 Turku 121,498 402 36.0 29.1 -6.9 Joensuu 120,730 399 34.8 30.2 -4.6 Mikkeli 113,126 374 34.9 28.1 -6.8 Lappeenranta 125,798 416 36.2 30.4 -5.8 Jyväskylä 121,498 402 34.6 28.5 -6.1 Vaasa 112,896 373 32.8 26.1 -6.7 Oulu 115,200 381 30.8 26.3 -4.5 Lahti 112,358 371 33.0 27.6 -5.4 Seinäjoki 105,293 348 31.5 25.9 -5.6 Kokkola 100,608 333 31.5 25.9 -5.6 Kotka 100,608 333 28.4 23.7 -4.7 Rovaniemi 106,291 351 29.1 25.8 -3.3 Pori 93,773 310 26.6 22.5 -4.1 Kajaani 92,006 304 27.1 22.1 -5.0 In this index housing loan costs are calculated for a surface area of 76.8 square metres, which, according to Statistics Finland, is the average size of a home in Finland. The loan taken out to purchase the home is 70 per cent of the purchase price and the loan period is 25 years. The basis for the index is that loan costs, excluding tax deductions, should not exceed 25% of a household's gross income. If the index is 100, the household spends 25 per cent of its gross income for loan servicing. The smaller the figure, the better the household's purchasing ability. For further information: Tarja Svartström, Private Economist, +358 9 165 88186, +358 40 826 2006 Reijo Heiskanen, Economist, +358 9 165 59942, +358 50 568 6623 This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.