Image: Juha-Pekka Inkinen / Yle

Almost half of all flats and houses in Finland could be in danger of losing value, one mortgage provider has claimed.

The bleak prediction comes as a comparison by Yle of house prices over recent decades found that property values in 31 postcode districts have risen more slowly than the cost of living, meaning homeowners have effectively lost money.

Yle’s findings, obtained by analysing house price and inflation data from Statistics Finland, highlight the areas in which property values have increased by less than 26 percent since 2001.

Because the cost of living has gone up by the same amount in that time, that means the real value of homes in those areas has either failed to increase at all, or even fallen.

Services moving away

The suburb of Sotkulampi in the eastern town of Imatra is one area where homeowners have lost money on their property over the last decade.

”Services here in Imatra are all gradually being relocated around a few hotspots, and unfortunately Sotkulampi isn’t one of them,” says Mervi Lehtimäki, a local estate agent.

Local shops and schools have closed down over the years. “It’s challenging for the residents, but this is by no means a bad area,” she insists.

True extent much wider

Experts believe the true extent of stagnation across the housing market is likely to be much higher than Yle’s calculations show. In half of the country’s 3,000 postcodes, there have not been six or more sales per year, meaning the area is not included in Statistics Finland’s records of average sale prices.

Experts believe prices in these 1,500 postal areas are therefore unlikely to have experienced strong growth. “If there’s only one sale per year in an area, what does that tell you about the state of the market there?” asks Ari Pauna, head of mortgage provider Hypoteekkiyhdistys.

There are currently around 3 million houses and flats in Finland. Ari Pauna from Hypoteekkiyhdistys estimates that only half of all current property will retain its commercial value in future.

Meanwhile Pasi Holm, head of economic analysts PTT, believes that a third of all property is at risk of failing to gain value, with one in every ten likely to fall in price.

Rural population drain

Both analysts agree, however, that negative growth is likely to affect increasing numbers of homes in the future.

”We have plenty of very rural areas, where values are falling. Then there are economically depressed industrial towns such as Kouvola, where the Voikkaa paper plant was closed down,” Holm said.

”In the long term, such as 10-15 years down the line, these developments will continue. This is a slowly growing phenomenon, which we must pay attention to,” Pauna said.

Unemployment levels are strongly linked to property values. In the centre of Helsinki, where employment prospects and population growth are much stronger, house prices have risen steadily, even during the recent recession. But even in the capital, the growth in property values has not hugely outstripped inflation.

Agents say that a city-centre apartment with a price tag of one million euros is currently on the market for three weeks on average before it’s snapped up.

Yle has produced an online calculator (in Finnish only) allowing you to see how property values in your area have changed.