Non-performing loans of housing associations piled up – These things are reflected in the price of financing

The non-performing loan portfolio of housing associations jumped many times last year compared to the previous year. The participants of the Market Council estimate that the strong increase in costs and interest rates seen in the last couple of years is the background.

“The rise in prices came as a bit of a surprise at first. The housing associations had not collected sufficient compensation, but now we certainly know better how to raise the compensation to a new level”, Actian credit risk manager Niina Kakoyi says in the Markkinaraati program.

Danish Bank manager responsible for housing association financing Ville Roihu however, is not worried about it in the big picture, because in relation to the entire loan portfolio, the number of non-performing loans is small. Finnish housing associations have about 25 billion euros in loans.

Otherwise, there are signs of better things. According to Roihu, the number of payment arrears and loan restructuring requests has recently decreased compared to the last couple of years.

Financial and tax expert of the Finnish Real Estate Association Juho Järvinen reminds that housing associations include other types of housing associations than those owned by households. According to the Bank of Finland, the growth of non-performing housing association loans is largely explained by housing associations owned by other parties, i.e., in practice, for example, by larger investors.

Several parties have been warning about the risks of housing association loans for many years. However, Roihu does not see a major systemic risk in the current situation.

Do housing associations owned by private people in a decentralized manner have to pay more for their financing because bigger players have problems?

“We have different building societies. Some are in a good situation and then the financing conditions are also good. But then there have been messages that when there is a more challenging situation in the company, it is also reflected in the price of financing”, Järvinen formulates.

If you are considering buying an apartment, you should familiarize yourself with it

In a housing association, all shareholders are ultimately jointly responsible for the housing association’s loans.

According to Kakoyi, the apartment buyer should carefully familiarize himself with the housing association’s papers and see what condition the housing association’s finances and buildings are in and whether major renovations are coming, and based on this, make a risk assessment.

“The building company’s current ability to pay says a lot. Of course, there can always be surprises, but the basic starting point is that the finances are currently balanced in the housing association and that there are plans for how to make repairs,” Järvinen says.

“The maintenance fee balance is a special item in accounting that shows how the economy has been managed,” Roihu advises.

Roihu adds that it would be desirable for Talohytiö to have repair plans for more than ten years instead of the required minimum of five years. If renovations have not been done, it is important to see if there are plans to do them. Not doing renovations is not necessarily a reason not to buy an apartment.

“You have to take that into account when buying and see if you are ready to pay for it and can pay,” says Roihu.

See the entire discussion in the attached video link.