Finns' housing affordability stable in early 2008
4.6.2008 10:00Housing affordability remained stable in Finland in the first quarter of the year. The index value in the whole country stood at 44; it was highest in Helsinki (65.6) and lowest in Kajaani (28.8).
During the first quarter of 2008, purchasing power was virtually unchanged from the last quarter of 2007, ie somewhat better than at its weakest during the third quarter of 2007. It is likely to remain on the same level in the summer as well.
Housing prices rose slightly, though. The increase in prices, however, slowed down, which has narrowed the gap in the price level in the Greater Helsinki Area, for example, between the city centre and the other regions. The nationwide average home price is 149,760 euros. In Helsinki it is over 250,000 euros, whereas the cheapest homes can now be bought in Kajaani, at the price of 94,000 euros.
Improved purchasing power since early autumn 2007 is attributable especially to salary increases, as interest rates fell only slightly. Due to the rise in housing prices the loan servicing costs of new borrowers did not decrease. Today a household in Helsinki spends 1,017 euros a month to service a loan taken out to purchase an average-sized home, whereas in Kajaani the amount is 377 euros, ie 640 euros less.
During the past year, home financing has increased nationwide, but the differences are quite large. In Lahti and Kuopio, for instance, the loan servicing cost on a monthly level has risen negligibly, whereas in Helsinki and Porvoo the rise exceeds 80 euros. The increase in salaries and the stabilisation of home prices have, however, made the rise in fuel and energy prices the biggest worry for consumers.
In this index housing loan costs are calculated for a 76.8 square meter dwelling, 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 the 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 ability to buy a home.
For further information:
Reijo Heiskanen, Economist, +358 9 165 59942, +358 50 568 6623
Tarja Svartström, Private Economist, +358 9 165 88186, +358 40 826
