BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/40
Following a brief pickup in spring, the rate of housing construction has subsided. In August 2016, new housing starts were up less than 4 % y-o-y. In spring 2015, new starts were up 20–25 % y-o-y. The pace of building growth could remain moderate in the future as purchases of building rights on lots has fallen sharply since the building boom peaked a couple years ago. In July-August, the volume of lots purchased by companies were down by about 20 % y-o-y.
From the economic policy perspective, the housing market situation is problematic. Some of loans intended to stimulate economic output have gone instead to housing investment, further fuelling the rise in housing prices. A housing bubble, in turn, makes it more difficult to deal with the debt problem. Local governments have tried to deal with the price rise by tightening city-specific rules on apartment purchases and loan conditions, as well as encouraging real estate developers to move ahead with new construction projects. At the moment, these measures have had little effect and the situation continues to degrade.