The Value of Houses

In HBL of Sö 9.02.20, p.5, it was mentioned that in the “gamla gruvorten Otamäki i Kajanaland” it was in the summer of 2013 possible to buy a three room flat with a balcony for 18.000 Euros. And if I think about it, my two room flat with a balcony in South Helsinki will at the moment be something like 15 times as expansive as that. All of which is a rather striking illustration of the in the media often mentioned problem that in very large areas of Finland the value of houses is going down.

According to the logic of the market this is simply self-evident: where housing is in short supply, the price of houses and flats will go up, and where people want to move away (because they, e.g., cannot find a job where they live), there will be a surplus of flats or even houses with the result that the prices will go down. And in a FREE market economy there will be hardly any limits how far the prices will go up or down. Which in turn can lead to political consequences – especially in Finland, where people are used to own their living places (already because of the fact that also the prices for living in rented places are free, i.e. easily huge). The situation is that people who have been paying for decades in order to be able to retire finally in a place where they can feel safe (because they OWN it) suddenly notice that the value of their place is going down, so that they, e.g., cannot pay for a place in a town to which they may have to move for a new job by simply selling their former place. Nor will a bank give them as much credit as they may need or have hoped for when offering their living place as a security. Altogether, the free market has made their lives very insecure, with the consequence that they will feel bad, may (with the “help” of the Sannfinländare) also arrive at the conclusion that that elite in Helsinki has simply forgotten them and that it might be time to vote for a party which is willing to “do something for the people”.

Well, it is mainly outside Kehä III that the prices for houses go down, which makes this a problem for especially Centerpartiet. But if one wants Finland to be a democracy also in the future it might be a good idea if ALL parties could switch their heads on. Needed would be quite a bunch of good ideas. Could one, e.g., think of new ideas what jobs to create in the areas which have been given up by industry (because, e.g., some mines were exploited to an end)? In the area of Kajaani there might be possibilities for environment-friendly agriculture (which in turn might attract nature tourism), perhaps also winter sport tourism (as in South Finland the winters do not offer many possibilities any more). For forestry the government could help by supporting the construction of houses from wood. For people who have moved out from the area in search of a job, it might be an idea that cities or even the government could build reasonably cheap flats for rent (so that it would be less important for the newcomers to be able to sell their former places for a good price). And so on. One should think, and think more, then also DO something. But certainly one should NOT rely on the invisible hand of the market and hope for the best.

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One Response to The Value of Houses

  1. Anders HH Jansson says:

    Really, for the areas ‘outside of Kehä III’, You are asking for some kind of efficient return to the kind of regional policies the 20th cry centerpartigovernments did pursue. However, they generally served to perpetuate old, not very productive, structures in agriculture and industry and it’s the death of those structures we now see. Lapland is special, due to tourism, but there, also, it was said that the hotel pays only after the fifth bankruptcy. At present, it is difficult to see any outside intervention or state funds that could change the direction in these areas.

    But there are places where things happen – most important, the South Ostrobothnia coastal region, but also other spots mainly on the coast. The common factor for such spots is local initiative even at Utö that has had the fortune not to bump into some kind of state or municipal barriers, ie a very local and personal version of the free market….but some of these initiatives seem to try to hang on to global capitalism and generally end up with a chinese or similar fakes, lately probably Mänttä-Vilppula.

    But for urban housing, what happens in Mänttä-Vilppula is not very relevant. Affordable housing can happen if housing production responds to demand – ok that’s the market, again – but, as we also saw in past decades, if local and state institutions regulate and support socially responsible housing production. That function has almost been eliminated, leaving the market to the four big firms – Skanska, Peab, YIT and SRV – and the global real estate investors, starting with Aberdeen, to get all the profit they can. Just now, the high profit sector seems to sag, as SRV found out, but their answer to that is simple – build less. Not a good recipe for affordable housing.

    So – centerpartiet managed to lock in the countryside and single factory towns in a structure doomed to extinction, and now we pay for that i.a with the populist and partly neofascist true finns (but note that their origin really is in the internal opposition to the agroelite of the 1960’s). Samlingspartiet, with the aid of a very monopolistic social democrat leadership managed to demolish social housing, and now we pay for that with urban workers unable to afford urban areas; perhaps a few more true finns?

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