Statistics from the Bank of Finland show that investment housing loans totaling 696 million euros were drawn during January-June, which is 18 percent more than in the corresponding period a year ago. At that time, investment housing loans totaling 590 million euros were drawn.
In June, investment housing loans totaling 120 million euros were drawn, whereas in the corresponding period a year ago, the figure was 96 million euros.
Itâs not quite rocketing yet, but itâs something compared to the last few years. Is the new interest rate level starting to feel normal now that rates have begun to stabilize?
The 12-month Euribor is hovering around 2.15 percent, and according to Bank of Finland statistics, the average interest rate on new loans for housing investors was 3.1 percent in June.
âAt a three percent level, the investorâs return equation already works,â Karlsson estimates.
Not directly related to housing, I am buying shares of a hall property from a company (i.e., one space from the property), the seller sent a somewhat strange message:
"Our bank sent this information to be shared with you, as the seller is a limited company:
We can provide a commitment, if necessary, to the buyer or the buyerâs bank regarding the transfer of shares 3 months after the transaction, due to (law, scrutiny period of the transaction). When a limited company disposes of shares, the transaction has a 3-month scrutiny period according to the Limited Liability Companies Act, should the seller go bankrupt. Other creditors then have the opportunity to challenge the transaction and seek its annulment if it is deemed to be undervalued.
For this reason, banks only release collateralized assets after 3 months if the owner is a limited company. We commit to holding the share certificate on behalf of the buyer during this period. The buyer has no risk here, because theoretically, if the transaction is annulled, the buyer gets their money back, but the bank does not get the released collateral back, although the debt is indeed returned.
Just for your information, this is a practice I wasnât aware of myself before. And of course, that commitment will be requested from the bank when making the transaction."
This kind of âwaiting periodâ sounds a bit strange? I couldnât quickly find any section related to that in the Limited Liability Companies Act.
I donât know directly about the legal provisions, but that apparently aims to prevent asset dumping before bankruptcy. However, if the purchase price has been reasonable, there shouldnât be a problem, as your text also states. Of course, there is always a risk involved.
Immigrants are brought in because they donât want their own citizens to have children. Surely, a program that would significantly increase the birth rate in the long term would be welcomed, but at least to my knowledge, no government action anywhere in the world has succeeded in this.
Pension wealth is an âaccounting illusionâ because housing is overvalued in it. Fortunately, less than 10% of Finnish pension companiesâ wealth is tied to real estate investments. Even if that value went completely to zero, which is of course not realistic, we would somehow manage even then.
Otherwise, it seems to be a basic âimmigration-criticalâ comment where immigrants are blamed for everything. And I am certainly not a supporter of free movement or of people being sought to be supported here by applying.
I agree with this, at least in part. The decline in birth rates is more due to cultural trends (normalization of childlessness, womenâs career paths, etc.). Without taking a stance on whether these trends are good or not, the decline in birth rates is a problem that cannot be solved merely by shoveling more money into the equation. Partially, shoveling money would certainly alleviate the situation, but it also comes with side effects.
To this, Otto Juote had replied several times:
"In addition to direct real estate holdings (â 9%), another layer of similar size in housing funds, infrastructure, and real estate-cyclical equity/debt investments raises the dependency to 25â30% of total employment pension assets.
A widespread, rapid housing collapse would immediately transmit to pension balances and bank solvency, tightening the credit market across the entire real economy.
The financially critical moment would likely be resolved through a bail-in process, but the ultimate âbufferâ would, of course, be the taxpayerâs ability and willingness to support the banking system.
On top of this, a deep recession would likely follow."
It must be clarified here that the problem in this text is considered to be âimmigrationâ and not âimmigrantsâ. Why does this matter? By framing immigrants (a group of people) as the problem, the entire text can be made to sound at least questionable. Because this is a very explosive topic, the wording must be precise.
I couldnât quickly find affirmative or negative information on whether itâs true that even almost a third of investments would be dependent on housing price developments, which even to an amateur investor sounds like a really big risk, so I donât just swallow it directly.
Perhaps an even more essential point against his writing, however, is that pension investments are not primarily located in Finland. Only about a fifth of pension assets are invested in Finland, which is still a very strong emphasis on Finland, but even if that 30% were indeed invested in housing-price-dependent assets in Finland, its share of total pension investments would be approximately 5-6%.
From the story: âHousing sales times are still very long, which according to Viljamaa indicates that the price level is often too high in the buyersâ opinion.â
Itâs not necessarily an opinion but an economic reality.
This really smells like a direct scam from the seller. The bank will indeed release the shares held as collateral for the debt, as long as the loans secured by the collateral are paid off.
In bankruptcy situations, recovery has been applied in case law mainly to undervalued transfers made to close associates. A transaction made by a completely external party at market price is unlikely to be reversed, even if the seller goes bankrupt.
This was an amusing point:
The seller probably ran out of money and came up with what they thought was a clever way to fix the situation.
However, the deal was made. That commitment came from the sellerâs bank, not the seller, where the share certificate is kept for 3 months starting from the repayment of the loan secured by the pledge, and the said purchase price was sufficient to settle the debt. A transfer entry was also already made on the share certificate.
Indeed it was. During the COVID years, banks pushed loans to a larger customer base and in larger amounts than today. Itâs quite clear that lending has tightened since then. It must affect both the number of home purchases and housing prices.
Indeed. Back then, loan interest rates were under 1%, now they are closer to 3%. So, despite the decreased prices, loan servicing costs are still three times higher compared to that time.
Example:
2021 apartment 200,000, own money 50,000 and 150,000 loan. Interest costs (1%) 1500 per year.
2025 apartment 170,000 (15% cheaper), own money 50,000 and 120,000 loan. Interest costs (3%) 3600 per year.
Even though wages have risen by a few percent in the meantime, living costs have increased by at least 10%, meaning everything else is also more expensive relative to purchasing power than 3-5 years ago.
Well, or at least in my own bubble, the idea prevails that better deals are still to be found. On the other hand, the current economic situation does not seem to be causing widespread panic selling - I hear more about individual cases that investors are buying cheaply.
Is there a bigger drop still to come, who knows It seems more like prices are falling very slowly on an annual basis as sellers appear out of necessity or are very eager to sell.
Finns like to queue, and when the trend turns, they prefer to buy expensive rather than cheap. This applies to housing, stocks, and other things. The herd mentality is alive and well in Finland.
On the other hand, itâs not such a crazy idea to try to make purchases when a turnaround starts to appear. A different matter, however, is what kind of signals one looks at. Just price development, the economy, etc. That is also a certain kind of risk management. Someone could equate it to basic technical analysis in stock investing, when waiting for a signal/confirmation of a course reversal. Or to the idea that when bad news no longer manages to push the price down, it might be an opportunity to strike.
Few have such funds for real estate investing that you would buy properties in the same way as stocks into falling prices in small batches And an owner-occupied home (not necessarily an investment, that is) is for many the biggest investment of their life.
You seemed to say several years ago that it was time to rush into housing purchases, as prices were about to rise. It might not be a bad idea to wait for the price decline to subside, even if you donât hit rock bottom. A few other excerpts from your views on the housing market:
So much for the expensive housing supply. Trailing after Romania, and many complain about how expensive it isâŠ
And many also said, referring to Juhaâs comment, that the interest rate level would remain at 4% and that would be the new normal, when I myself said weâd go to 2% or belowâŠ
Iâm still of the opinion that growth cannot be achieved in Europe and weâll soon drift towards zero interest ratesâŠ
How much does that distort the national statistics for Finland? It would be interesting to see that same graph focused on growth centers / large cities / areas where the general public is currently, on average, looking for investment properties and owner-occupied homes. If that statistic includes all of Finland, considering how much various housing we have that is deteriorating, then Iâm not surprised we are at the bottom.
It seems more like prices are falling very slowly on an annual basis as sellers appear out of necessity or are very eager to sell.
And an owner-occupied home (not necessarily an investment, that is) is for many the biggest investment of their life.