OP's economists' housing market review: Uncertainty diminishes part of the price increase – According to Carrie Bradshaw index, Vöyri is the most affordable place to live for singles in Finland

OP Financial Group's economists predict that home prices will rise by two percent this year, and the price increase will slightly accelerate next year. Growing uncertainty is affecting the pace of growth this year, but the gradual recovery of the housing market continues.

In terms of volume, the housing market has been picking up for a year now. However, prices have not yet been on the increase compared to a year ago. According to OP Financial Group's economists' forecast, home prices will rise by an average of 2 percent this year. The forecast has been lowered by one percentage point from April's forecast due to weaker economic development. Next year, the price increase is expected to continue at a rate of three percent.

– Home sales are clearly more active than, for example, a year ago at this time. Nevertheless, there is still room for growth in home sale volumes, and we expect that the volumes will continue to rise for some time, says Joona Widgrén, Senior Economist at OP Financial Group.

The recovery is not yet clearly visible in home prices. During the first quarter, the prices of owner apartments fell on average by 1.3 percent across the country, compared to a year ago. The decline was fastest in studio apartments, with prices falling by 2.5 percent.

– Home prices have been quite stagnant for a year now. We slightly lowered our forecast for this year's price development due to increased uncertainty and weak labor market development. We expect prices to pick up this year. Risks to price development have nevertheless increased recently, Widgrén notes.

Carrie Bradshaw moving to Vöyri?

The Economist magazine calculated the Carrie Bradshaw index, which illustrates the income level required for a single-person household to keep studio apartment rental costs below 30 percent of their income. In OP's economists' housing market review, a similar index is calculated for Finland. The purpose of the index is to show where singles have the best opportunities to rent a studio apartment. The index is named after the main character of Sex and the City, Carrie Bradshaw, who lived alone in a rented apartment in New York.

– The number of single-person households has increased substantially, and nearly half of households consist of single individuals. Half of these live in rented accommodations, making this group significant.

The most expensive city for singles is Helsinki, where a reasonable rent requires a net income of 2,600 euros. In Helsinki, the current residents' median income is significantly lower than the required income. The best rent-to-income ratio is in Vöyri, where rental expenses would remain reasonable with a net income of just over 1,000 euros.

– Rents are clearly higher in larger cities, and, on the other hand, incomes are not higher respectively. Therefore, it can be said that singles in larger cities generally have weaker opportunities to rent affordable studio apartments. The abundant construction in recent years, however, has boosted studio apartment rentals, especially in municipalities in the Helsinki Metropolitan Area.

In the index, the rent is calculated based on the average rent level of new rental agreements for non-subsidised apartments. A 30-square-meter apartment is used as an example home. The income refers to disposable monetary income. Only municipalities, where rental prices for studio apartments are available, have been taken into account. In several municipalities, there are not enough rental agreements for studio apartments to provide statistics.

The latest housing market review by OP’s economists is available at https://www.op.fi/op-financial-group/to-the-media/publications/economic-barometers

Monthly studio rent in relation to the median disposable income of a single person. Includes only municipalities and postcode areas with available rental data.

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OP Financial Group Communications, tel. 010 252 8719, viestinta@op.fi 

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