Finland: Housing Market Review: A slow turn towards recovery

Finland’s housing market is approaching a slow recovery, but higher interest rates, weak investor demand and excess supply will keep prices under pressure in the near term.

• Transactions were 13% below the year-earlier level in January–September, while prices of dwellings in housing companies fell 3.3% year on year in August and nationwide prices declined 3.9% year on year in the second quarter.
• Nordea forecasts a 3% house-price decline in 2026, followed by 1% growth in 2027 and 2.5% growth in 2028, as employment, confidence, lower construction and stabilising rates support demand.
• Property characteristics materially affect value: the most expensive 10% of postcode areas are 4.5 times pricier than the least expensive 10%; a 2020 dwelling costs 34% more than a 2000 dwelling, while good condition adds 22% versus satisfactory condition.
• These characteristics also affect liquidity: a dwelling completed in 2022 sells 30 days faster than one completed in 2005, good condition cuts selling time by 18 days, and tenanted dwellings or poor energy ratings add 14 days.
• Financing has eased, with mortgage terms extended from 30 to 40 years and 17.6% of new loans now exceeding 30 years, but mortgage drawdowns remain weak and household debt has fallen to its 2015 level.
• Slower household growth and excess rental supply remain constraints: household growth was below 9,000 last year versus a typical 20,000–30,000, while state-subsidised housing starts fell 27% this year.

Takeaway: Investors should expect continued weakness before a gradual housing recovery, with location, building quality, energy efficiency and supply conditions determining relative performance; abundant rental supply and limited household growth constrain the speed of rent and price gains.