Further improvement in housing affordability
26.11.2009Housing affordability continued to improve in the second and third quarters of 2009. At the end of the third quarter the index value on nationwide level was 31.0 compared to 32.4 in the first quarter. The value is now at its lowest since 1989 when Nordea started its calculation of the index. The currently record low interest rates on housing loans enhance housing affordability. During the review period the interest rate dropped to 2.3 per cent from 3 per cent in the first quarter.
Housing affordability scored lowest in Helsinki (43.6) showing a decrease of 0.9 index points. The monthly loan servicing cost of a household living in Helsinki remained unchanged compared to the first quarter at EUR 747. Housing affordability was best in Pori (20.6) where monthly loan servicing cost declined by EUR 26 to EUR 290. The lower the index value is, the greater the housing affordability.
Home prices rose throughout Finland
The average price of a home in Finland is EUR 149,376. In Helsinki the average price is EUR 244,224. Housing is least expensive in Pori where the average price is EUR 94,771.
- The housing affordability index reached an all-time high in the third quarter. The servicing costs of a new housing loan in relation to income were now even lower than at the end of 1996 when they were previously at their lowest. Housing affordability was poorest in 1989 when the critical level of 100 points was clearly broken especially in the Greater Helsinki Area, says Nordea’s Private Economist Anu Numminen.
However, housing affordability is not as advantageous as it could be in all areas; as in the case of Helsinki city centre. Housing affordability is still markedly better than in the previous peaks in Oulu and Jyväskylä, for example.
- This time housing affordability is strongly enhanced by the exceptionally low interest rates. Calculated with the average interest during the euro era (4.4 per cent), housing affordability would now correspond to the average level of the past 10 years. Short rates are likely to remain low well into 2010, but borrowers should keep in mind that over the next 10 years interest rates may be on the level witnessed in the euro era so far, or may rise even higher, says Economist Reijo Heiskanen.
| Home price | Monthly loan servicing cost | Index 1/09 | Index 3/09 | Change | |
|---|---|---|---|---|---|
Whole Finland |
149376 |
457 |
32,4 |
31,0 |
-1,4 |
Helsinki |
244224 |
747 |
44,5 |
43,6 |
-0,9 |
Espoo |
213581 |
654 |
37,7 |
36,7 |
-1,0 |
Porvoo |
158515 |
485 |
36,3 |
32,5 |
-3,8 |
Vantaa |
172186 |
527 |
36,2 |
33,9 |
-2,3 |
Tampere |
152448 |
466 |
33,6 |
31,5 |
-2,1 |
Hämeenlinna |
126874 |
388 |
29,5 |
27,9 |
-1,6 |
Kuopio |
132173 |
404 |
30,0 |
28,5 |
-1,5 |
Turku |
128410 |
393 |
29,6 |
27,8 |
-1,8 |
Joensuu |
123648 |
378 |
29,7 |
27,8 |
-1,9 |
Mikkeli |
122035 |
373 |
28,6 |
28,0 |
-0,6 |
Lappeenranta |
125875 |
385 |
29,5 |
27,6 |
-1,9 |
Jyväskylä |
128717 |
394 |
28,5 |
27,0 |
-1,5 |
Vaasa |
118502 |
363 |
25,5 |
24,5 |
-1,0 |
Oulu |
118886 |
364 |
26,6 |
24,9 |
-1,7 |
Lahti |
114509 |
350 |
27,4 |
25,4 |
-2,0 |
Seinäjoki |
110362 |
338 |
26,0 |
24,6 |
-1,4 |
Kokkola |
112051 |
343 |
25,2 |
24,5 |
-0,7 |
Kotka |
101760 |
311 |
24,3 |
21,6 |
-2,7 |
Rovaniemi |
99379 |
304 |
25,2 |
21,5 |
-3,7 |
Pori |
94771 |
290 |
22,9 |
20,6 |
-2,3 |
Kajaani |
96768 |
396 |
21,5 |
20,9 |
-0,6 |
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.
For further information:
Anu Numminen, Private Economist, +358 9 165 88218, +358 50 597 0447 Reijo Heiskanen, Economist, +358 9 165 59942, +358 50 568 6623
