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Housing prices in Finland are expected to see modest growth in 2024, according to a forecast by Pellervo Economic Research (PTT). Declining interest rates, rising real incomes, and population growth in major cities are driving the increase. However, high housing supply and economic uncertainty are limiting the pace of recovery.
Veera Holappa, senior economist at PTT, said the improving financial situation of households will help boost demand.
“Interest rates are trending downward, and household incomes are developing positively, which supports home-buying decisions. If global economic uncertainty remains under control, a recovery in economic growth and employment will strengthen consumer confidence and stimulate the housing market. This will also push prices up,” she said.
The prices of old apartment buildings are expected to rise by 1.5% in 2024, while private-sector rents are forecast to increase by 1.6%.
Housing demand is being driven mainly by pent-up needs for buying and moving rather than by investors. Institutional investors, in particular, remain cautious due to interest rate conditions and the state of the rental market.
Despite low levels of new construction, the existing high supply of housing is preventing significant price or rent increases. Construction activity is expected to recover slightly by mid-2024, but a substantial increase in new housing supply is not expected before 2027.
“If completed housing stock shrinks in major cities, a housing shortage could emerge, leading to stronger price growth in the coming years,” Holappa said.
Housing price trends in the Helsinki metropolitan area vary by municipality. In Helsinki, prices are rising in line with the national average as demand strengthens. In Vantaa, price increases remain weak due to low demand for owner-occupied housing. Espoo is seeing faster price growth, partly because investors play a smaller role there compared to Helsinki.
In Turku and Tampere, prices for old apartment buildings have not fallen as sharply as in other parts of Finland. Turku’s price development stabilised in 2023, while Tampere continued to see a declining trend.
Oulu’s housing market began recovering last year, with strong growth towards the end of 2023. In contrast, Jyväskylä and Lahti are expected to see below-average price development due to weak demand and high supply.
Population growth is increasing rental demand in major cities, but an ample supply of rental housing—particularly in the Helsinki region—is keeping rent hikes moderate. In Vantaa, rent increases remain slower than in Helsinki and Espoo.
Turku and Tampere are expected to see rental growth continue at last year’s pace, with Tampere experiencing a tightening supply of available rental apartments.
Government-subsidised ARA rents are rising faster than private-sector rents, with an average increase of 2.7% expected in 2024. However, regional differences are significant. In Lahti, for example, ARA rents are forecast to drop by 3.8%.
The report highlights the need for different housing market solutions in growth centres and declining areas.
Markus Lahtinen, managing director of PTT, noted that projects linked to the green transition could create opportunities in areas with declining populations, but sustainable growth cannot rely on a single employer or municipality.
“In these regions, solving vitality challenges and developing the housing market should be approached at the regional level,” he said.
In growth centres, preventing segregation is a key issue. Economic disparities and rising immigration are increasing demand for rental housing, while rising property prices may push middle-income households further from city centres. Publicly subsidised rental housing plays a crucial role in integrating immigrants and maintaining social balance.
“Publicly supported housing production is the most important tool for managing segregation. However, state budget cuts create uncertainty about future ARA housing supply. I am concerned about whether there are enough measures available to curb segregation,” Lahtinen said.
HT
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Source: www.helsinkitimes.fi
