zlacker

Helsinki is currently an interesting case, technically having oversupply of apartments. It's because the rising interest rates cratered the buyers' budgets -- the result is a mild downward trend in prices, definitely no crash. Building companies sit on a large supply on finished unsold apartments but steadfastly refuse to lower prices even a bit.

New construction has halted completely. Seems like the construction sector will rather hold their finished stock and wait for the demand side to pick up due to necessity (people still move in to the city), or due to interest rates eventually going down.

>>distan+(OP)
Building companies don't own the apartments, banks do. Lower effective prices means writing off debt.

>>distan+(OP)
“Oversupply” is in the eye of the beholder. There’s a market clearing price for everything.

The builders can hold out for a while, but the shoe has to drop eventually. Builders only make profit when building, and if your credit is extended on old projects you can’t start new ones, hence why construction has halted.

The problem is covid. Pretty much everyone in any developed economy believes the inflation+interest rate increases will be temporary. So they’re betting inflation will go back to what it was, interest rate policy will loosen again, and people’s budgets will increase again.

I think they might be in for a very rude awakening. And not only that, housing preferences for the highest income professionals have fundamentally changed due to WFH. They could all get stuck dumping the wrong stock on a weak market all at the same time in a year or so.

>>fh973+A3
Not in Finland. Each housing complex is a separate company, and when you buy an apartment you actually buy a share in the company. Until sold to the buyers, the housing company is usually owned by the construction company. Banks of course provide funding, but the construction company is the one left holding the bag if the apartments don't sell.

>>distan+(OP)
Government should build housing and sell it at a modest loss. The markets are overheated and can do with some cooling. Too bad for anyone using property values as collateral for arcane financial schemes, should have managed your risk better.

>>pembro+S4
Indeed, it's a waiting game now. The construction companies have a valid expectation that since new construction has halted, the current supply will eventually sell, and the city will even run into a state of undersupply. Only time will tell which way that goes.