Early signs indicate that the downturn of the Finnish housing market has already bottomed out; the ongoing economic recovery is expected to support home-buying sentiment and ease the slowdown in the construction sector brought about by the buildup of unsold inventory.

This extended overview from the Global Property Guide covers key aspects of Finland's housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

Housing prices across Finland appear to have bottomed out, with early signs of a cautious recovery emerging toward the end of 2024. According to Statistics Finland, the average sales price for second-hand dwellings in Q4 2024 stood at EUR 2,609 (USD 2,781) per square meter, reflecting a modest year-on-year increase of 0.58% (a 0.35% decline when adjusted for inflation). Meanwhile, new dwellings recorded an average sales price of EUR 4,954 (USD 5,280) per square meter, marking a 2.46% annual increase (1.52% inflation-adjusted), although the Pellervo Economic Research Institute (PTT) notes that price statistics for new housing may not fully reflect actual market conditions due to low sales volumes and aggressive marketing campaigns by developers attempting to counter declining demand.

Finland's house price annual change:

Apartment prices, on average, increased at a relatively faster pace than those of terraced houses. Regionally, Greater Helsinki continued to lag behind the rest of the country, exhibiting stagnation or negative year-on-year trends in both the apartment and terraced house segments.

Housing price dynamic by region and property type:

Looking ahead to 2025, the PTT forecasts a gradual upward trend in house prices, supported by easing interest rates and rising household disposable incomes. A stable global economic environment, combined with improving employment levels, is expected to strengthen consumer confidence and drive housing demand. However, the ample supply of available housing is likely to limit the scale of price increases. "The current rise in housing demand is largely driven by households addressing postponed housing needs, while investor activity remains subdued," the report notes. The Finnish Real Estate Association (SKVL) supports this view, anticipating the prices for second-hand apartments to increase marginally by 1-3% throughout 2025.

Historic Perspective:

The Evolution of Housing Market Dynamics in Times of Boom and Bust

Since the early 2000s, Finnish first-time home buyers have largely experienced a steady increase in housing prices, with only occasional short-lived declines. The price growth that followed the recession of the 1990s was briefly interrupted by the bursting of the tech bubble and the global financial crisis. In 2001, the economy slowed, leading to residential market stagnation. However, the downturn was temporary, and house prices quickly resumed their upward trajectory. Despite rising housing costs, homeownership remained accessible, as banks had ample liquidity and mortgage lending expanded rapidly. Loan terms were relatively flexible, often extending to 25-30 years, with increasing loan sizes and no mandatory down payment requirements.

A major shift in the accessibility of financing options occurred during the financial crisis of 2008-2009 when global banking instability led to stricter lending regulations aimed at reducing financial sector risks. Mortgage applicants were now required to provide their own savings as a down payment, as banks could no longer finance the full purchase price of a home. While lending conditions tightened, borrowing costs declined, with interest rates falling throughout the following decade. Since 2016, all Euribor rates used as mortgage reference have been in negative territory, keeping overall mortgage interest rates below one percent.

The euro crisis of the early 2010s temporarily slowed housing transaction volumes but did not halt price increases. Housing remained affordable relative to wages, and sales volumes stabilized and remained high. Similarly, the COVID-19 pandemic had only a brief dampening effect, with low interest rates and favorable financing conditions continuing to drive price increases.

Market sentiment shifted in 2023 as the central bank tightened monetary policy to combat inflation. Rising interest rates significantly impacted the housing market, increasing loan servicing costs while inflation eroded purchasing power. The Finnish economy entered a recession, unemployment rose, and housing transactions fell to near-record lows. House prices declined, particularly in the Helsinki metropolitan area and other major cities. While new residential construction starts had already slowed in 2022, a substantial number of previously initiated projects were completed in 2023. The construction sector faced heightened financial pressure, with bankruptcies exceeding those recorded in 2009, the year following the global financial crisis. Throughout 2024, housing market activity remained subdued, though early signs of stabilization emerged in both demand and pricing.

House price dynamic (second-hand dwellings):

Data Source: Statistics Finland.

Construction activity dynamic (12-months moving total):

Data Source: Statistics Finland.

Demand Highlights:

Transaction Volumes Still Stagnant but Signs of Recovery Emerge

Housing demand in Finland remained muted in 2024, with transaction volumes largely unchanged from the previous year. According to data from the Federation of Finnish Real Estate Agencies (KVKL), a total of 52,404 residential property transactions were recorded nationwide, reflecting a marginal year-on-year increase of 0.98%. At the same time, the figure remained 26.01% below the five-year average of 2019-2023.

Quarterly data indicates a potential for gradual recovery, with transaction volumes increasing steadily throughout the year. While the start of 2024 saw a historically low number of sales, market activity improved in the following months. "By the final quarter, home sales were 35% higher than in the first quarter, making it the strongest period of the year. Typically, the housing market reaches its peak in the second quarter - spring - so this shift suggests that the market downturn, along with its impact on the real estate and construction sectors, bottomed out in early 2024," commented Tuomas Viljamaa, CEO of KVKL.

The secondary market continued to dominate housing transactions, accounting for approximately 96% of total sales. 50,392 transactions were recorded in the segment, representing a modest 1.48% year-on-year increase. In contrast, sales of newly built properties declined by 10.06% year-on-year, with just over 2,000 units sold. "The growing price difference between new and existing homes remains a key challenge for the market. Buyers tend to choose second-hand properties when they offer more space for a similar price. Closing this gap and boosting new home sales will likely require price adjustments - either an increase in the value of existing homes, a decrease in new home prices, or both," Viljamaa explained.

Data Source: KVKL.

By property type, apartments accounted for the largest share of transactions (51%), followed by terraced houses (25%) and detached houses (24%). Among Finland's largest cities, most recorded slight increases in sales volumes compared to 2023. The only exceptions were Vantaa and Oulu, registering 8.5% and 4.1% year-on-year drops respectively. Espoo registered the highest growth, with transaction volumes rising by 4.1% annually.

Residential sales dynamics in the largest cities:

The outlook for Finland's residential property market is cautiously optimistic. KVKL projects a 6-9% increase in the number of transactions in 2025. Veera Holappa, Senior Economist at the PTT attributes this anticipated recovery to improving macroeconomic conditions and monetary policy. "Interest rates are on a downward trajectory, and household disposable income is strengthening - both factors that support home purchase decisions," she stated, adding that continued economic and employment growth would further bolster homebuying sentiment, provided global uncertainties remain contained.

Supply Highlights:

New Construction Stalls Amid Weak Demand and High Inventory

Residential construction activity in Finland remains subdued, continuing a trend seen in recent years as elevated interest rates and inflationary pressures have led to a sharp decline in demand and a buildup of unsold housing inventory.

While data from Statistics Finland indicates that the sharp drop in housing starts may have stabilized - with a marginal 1.3% year-on-year increase to 20,152 units during the first 11 months of 2024 - the figure remains significantly below historical averages, approaching levels last seen during the recession of the 1990s. "Since the number of unsold new dwellings remains high, hardly any new construction projects are being started <…> Market-based construction has plummeted to exceptionally low levels, and in 2024 housing construction has consisted largely of publicly supported construction, including state-subsidized ARA housing," the Bank of Finland (BOF) noted in their latest forecast.

Reflecting the weak housing starts in recent years, the number of completed dwellings has also declined sharply, totaling just 19,404 units in the first 11 months of 2024 - a 48.1% decrease compared to the previous year. "Between 2015 and 2022, Finland experienced a surge in housing construction, driven by zero interest rates. However, the large and still-growing inventory of unsold homes, coupled with sluggish sales, is now suppressing new development," commented Finland's Ministry of Finance.

Data Source: Statistics Finland.

Although experts suggest that the downturn in construction may be nearing its lowest point, a rapid recovery remains unlikely in the near term. The issuance of building permits - a key forward-looking indicator of future construction activity - continued to decline, falling by 25.3% year-on-year to 14,694 units in the first 11 months of 2024, with no clear signs of an imminent rebound.

Data Source: Statistics Finland.

According to the PTT, housing supply is expected to continue contracting through 2025, with building starts stabilizing but completions declining further. While the slowdown in residential construction is projected to ease, growth is expected to be gradual. "Due to long project timelines, significant new housing production will not reach the market before 2027, even in the best-case scenario," noted the institute's experts.

Juho Kostiainen, senior analyst at Nordea Markets, emphasized that a sustained recovery in the sector depends on three key factors: population growth in major cities must outpace current housing production to reduce rental vacancies, housing sales must gain momentum to support price increases in the secondary market, and construction costs - along with land prices - must remain stable or decline slightly from current levels.

Rental Market:

Rental Inflation Slows, Modest Growth in Private Sector Projected

The rapid acceleration of rental inflation observed across Finland in 2022-2023 reversed in 2024, with the country-wide rent index reported by Statistics Finland registering a 2.3% annual increase in Q4 2024, down from 2.4% in the third quarter and 2.5% in in the second quarter of the year. Rental growth was much more pronounced in the government-subsidized sector at a 4.7% year-on-year increase in Q4 2024, compared to just a 1.2% year-on-year increase in the non-subsidized sector. In the Greater Helsinki region, subsidized rents grew by 5.6%, and non-subsidized rents rose by 0.4% year-on-year.

According to Statistics Finland, throughout 2024, rents of non-subsidized dwellings increased most in Rovaniemi (2.8%), Oulu (2.7%), and Hämeenlinna (2.6%) and least in Vantaa (0.2%), Rauma (0.3%), Espoo (0,5%), and Helsinki (0.5%). Rents of government-subsidized dwellings went up most in Kouvola (7.5%), Hämeenlinna (6.9%), and Helsinki (6.5%) and least in Kajaani (1.7%), Lappeenranta (2.0%), and Mikkeli (2.1%).

Overall, since 2015, rents of non-subsidized dwellings have increased by 11.6% and rents of government-subsidized dwellings by 16.9%.

Data Source: Statistics Finland.

In nominal terms, the weighted average rents per square meter reached EUR 15.66 (USD 16.73) for all dwellings, EUR 13.17 (USD 14.07) for subsidized dwellings, and EUR 16.84 (USD 17.99) for non-subsidized dwellings in Q4 2024. The average rents for new tenancy agreements in the non-subsidized sector stood even higher at EUR 17.65 (USD 18.85).

Among Finland's five largest metro areas, the highest average rents per sqm in both segments were observed in Helsinki at EUR 14.82 (USD 15.83) for subsidized dwellings and EUR 22.39 (USD 23.91) for non-subsidized dwellings, followed by Tampere at EUR 13.78 (USD 14.72) for subsidized and EUR 17.00 (USD 18.16).

Weighted average rents per submarket:

Gross rental yields for apartments in Finland averaged 4.93%, according to research by the Global Property Guide conducted in November 2024, down from 5.06% previously reported in July 2024. Among the monitored regional submarkets, the highest average yield was observed in Jyväskylä (6.05%), while Oulu (5.04%), Turku (5.00%), and Tampere (4.41%) showed notably lower potential performance. In the capital city of Helsinki, the average yield was reported at 4.15%.

Looking ahead, the experts from PTT, cited by the Finnish Broadcasting Company (Yle), expect private rents to grow by 1.6% nationwide in 2025. The modest projected growth is tied to the improving macroeconomic situation, encouraging purchasing decisions among potential homeowners, and a large supply of private rentals on the market (particularly in the capital region). According to the institute, rents in the government-subsidized sector are also expected to increase, and by a wider margin than in the private sector.

As of 2023, 28.9% of Finland's population lived in rented housing, including 8.8% in government-subsidized dwellings and 20.1% in other types of rental properties.

Mortgage Market:

Interest Rates on Downward Trajectory, New Lending Still Subdued

Lending interest rates in Finland are on a downward trajectory along with the European Central Bank (ECB) policy rates. Following a 25 b.p. cut in December, at the end of January 2025, the ECB announced another 25 b.p. decrease in its key rates, bringing the deposit facility rate to 2.75%, main refinancing operations rate to 2.90%, and marginal lending facility rate to 3.15%.

Finland's mortgage loan interest rates:

"The disinflation process is well on track. Inflation has continued to develop broadly in line with the staff projections and is set to return to the Governing Council's 2% medium-term target in the course of this year. Most measures of underlying inflation suggest that inflation will settle at around the target on a sustained basis," said the ECB in a press release on the decision.

Data Source: ECB.

In parallel, the average interest rates on loans to households for house purchases in Finland reached their peak in late 2023 - early 2024 and have been climbing down since. The average interest rate on new housing loans was most recently reported at 3.21% in December 2024, down 1.07 p.p. since the same period the year before but not yet at the level observed two years prior. For outstanding housing loans, the average interest rate reached 3.56%, 0.52 p.p. down since December 2023 but still notably above the 1.97% reported in December 2022. The same trend was observed for loans of all initial rate fixation periods and maturities.

Average interest rates on loans to households for house purchase:

The Federation of Finnish Real Estate Agencies expects further decreases in interest rates to boost lending activity in 2025. "This year, as key interest rates fall, consumers' purchasing power will continue to strengthen, and the interest rate review dates will likely be positive surprises for families and mortgage borrowers. It is very likely that people will also return from renting to owning their homes, which will again increase activity in housing transactions," said their CEO Tuomas Viljamaa in a recent market review.

As of the end of 2024, however, new residential lending in Finland registered a decline for the fourth year in a row, based on the ECB data. The total value of new housing loans (including pure new loans and renegotiations) issued between January and December reached EUR 21.9 billion (USD 23.7 billion), a 16.2% decline from the 2023 level. The drop can be primarily attributed to renegotiated loans, while the value of pure new loans issued stayed virtually the same at EUR 12.8 billion (USD 13.8 billion), only a 0.03% decline from 2023.

According to the latest figures from the BOF, 90.3% of the new housing credit drawdowns by Finnish households in 2024 were for owner-occupied properties, while the remaining 9.7% were taken out for buy-to-let properties.

Data Source: ECB.

Apart from the elevated borrowing costs, the continued slowdown of residential lending in recent years is tied to the cancellation of tax deductions for housing loans that came into effect in Finland in 2023. "The right to deduct interest on homeowner loans would naturally have mitigated the blow to households' purchasing power caused by rising interest rates. In all other Nordic countries, the right to deduct interest on homeowner loans is still in use. It is hardly surprising that the housing market in all other Nordic countries began to recover more strongly during 2024 than in Finland," noted Tuomas Viljamaa, CEO of the Federation of Finnish Real Estate Agencies.

After a decade of moderate annual growth of 2.7%, on average, the total value of outstanding housing loans in Finland dropped by 1.7% in 2023 and by a further 1.2% in 2024, reaching EUR 106.2 billion (USD 115 billion) at the end of the year. The relative size of the market has also declined in recent years from an estimated 43.8% of GDP at current prices in 2020 to 39.3% in 2023.

Data Sources: ECB, Statistics Finland.

Socio-Economic Context:

Challenging Public Finances and Gradual Recovery from Recession

Finland's economy began the recovery from the 2023 recession, supported by easing inflation and real wage growth. However, the rebound is hindered by stagnant construction investment and weak external demand, as pointed out in the 2025 Article IV Staff Report from the International Monetary Fund (IMF). "The economic recovery is expected to gain momentum in 2025, but downside risks, especially from abroad, remain elevated," summarized the IMF.

After a 1.2% contraction in 2023, the country's economy is estimated to have contracted further by 0.2-0.3% in 2024, with a rebound of 1.5% and 1.6% real GDP growth projected by the European Commission for 2025 and 2026, respectively, as private investment and consumption recover alongside easing interest rates and stabilizing house prices.

Consumer Price Index (CPI) inflation in Finland has fallen steeply due to declining energy prices and weak domestic demand, dropping from 7.2% in 2022 to 4.3% in 2023 and 1.0-1.2% in 2024. Most recently, the indicator was reported by Statistics Finland at just 0.7% in December 2024. Supported by the recent VAT hike and recovering domestic demand, inflation is expected to stabilize around 2% in 2025, based on forecasts from the IMF and the European Commission.

Data Source: IMF.

In Finland's labor market, weakening economic activity during the recession led to a notable increase in the unemployment rate from 6.8% in early 2023 to the 8.9% most recently reported by Statistics Finland in December 2024. At the same time, the European Commission forecast notes that the fall in employment in 2024 was concentrated in the manufacturing, construction, and professional services sectors, while labor shortages persisted in other sectors, such as healthcare.

As the broader macroeconomic landscape improves, employment is expected to recover gradually in 2025 and 2026. The unemployment rate is projected to fall to 7.9% in 2025 and 7.5% in 2026. 

Data Source: Statistics Finland.

The state of the public finances in Finland remains challenging. The country's general government deficit is set to increase to 3.7% of GDP in 2024 from 3.0% in 2023, driven by considerable increases in government spending and a slowdown in public revenue growth, according to the European Commission assessment. In an attempt to reduce deficits, earlier in 2024, Finland's government announced a large consolidation package concerning both revenue and expenditure, which followed prior consolidation measures adopted in 2023.

"The general government deficit is forecast to decrease to 3.0% of GDP in 2025 as the announced consolidation measures are expected to come into force, while revenue growth is set to get a positive boost from the economic recovery. <…> In 2026, the general government deficit is forecast to further decrease to 2.5% of GDP, thanks to recovering public revenue, while expenditure growth is projected to slow down," said the European Commission on the measures.

At the same time, due to persistent deficits, Finland's public debt relative to GDP has grown over the past decade to record highs, projected to reach 82.6% in 2024 and forecast to increase further to 85.3% by 2026.

In February 2025, Fitch Ratings affirmed Finland's 'AA+' standing with a negative outlook, pointing out high and rising government debt and low potential growth as balancing factors to the country's strong fundamentals, as well as the risk that fiscal consolidation will be insufficient to achieve debt stabilization over the medium term.

Overall, according to the latest forecast from the BOF, the economic outlook for Finland in the immediate years ahead is surrounded by many uncertainties, including longstanding structural challenges domestically, potential implementation of new import tariffs in the US (which would make the global trade environment less favorable for Finland's exports), and geopolitical tensions in Ukraine and the Middle East.

Sources:

1. Statistics Finland
   1. Annual National Accounts: https://stat.fi/
   2. Prices and Consumption: https://stat.fi/
   3. Labor Force Survey: https://stat.fi/
   4. Dwellings and Housing Condition: https://stat.fi/
   5. Rents of Dwellings: https://stat.fi/
   6. Fall In Prices Of Old Dwellings In Housing Companies Slowed Down In 2024 (Press Release): https://stat.fi/
   7. The cubic volume of granted building permits decreased by 20 percent year-on-year from September to November 2024 (Press Release): https://stat.fi/
2. Bank of Finland (BOF)
   1. Interest Rates on New Consumer Credit Lower: https://www.suomenpankki.fi/
   2. Forecast for the Finnish Economy - December 2024: https://www.bofbulletin.fi/
   3. Sustained Efforts Needed to Turn Finland's Public Debt Ratio Around: https://www.bofbulletin.fi/
   4. Finland's Economy Will Pick Up Gradually: https://www.bofbulletin.fi/
3. Ministry of Finance
   1. Construction 2024-2025: https://julkaisut.valtioneuvosto.fi/
4. European Commission
   1. Economic Forecast for Finland: https://economy-finance.ec.europa.eu/
5. European Central Bank (ECB)
   1. ECB Data Portal: https://data.ecb.europa.eu/
   2. Key ECB Interest Rates: https://www.ecb.europa.eu/
   3. Monetary Policy Decisions, 30 January 2025: https://www.ecb.europa.eu/
6. International Monetary Fund (IMF)
   1. Country Overview: Finland: https://www.imf.org/
   2. 2025 Article IV Staff Report: https://www.imf.org/
7. Pellervo Economic Research Institute (PTT)
   1. Regional Housing Market Forecast 2025 (FI): https://www.ptt.fi/
8. The Finnish Real Estate Association (SKVL)
   1. SKVL's Forecast For Housing Sales For 2025 (FI): https://skvl.fi/.
9. Federation of Finnish Real Estate Agencies (KVKL)
   1. Housing Market Review Y2024 (FI): https://kiinteistonvalitysala.fi/
   2. Annual Review 2024: Housing Transaction Volumes Pushed Into The Positive Territory, Driven By A Strong End Of The Year (FI): https://kiinteistonvalitysala.fi/
   3. January 2025 Housing Market Review (FI): https://kiinteistonvalitysala.fi/
10. Nordea
    1. Finland: Housing Market Review - Autumn 2024 - Slow Recovery: https://corporate.nordea.com/
    2. Finnish Economic Outlook: https://www.nordea.com/
11. Fitch Ratings
    1. Fitch Affirms Finland at 'AA+'; Outlook Negative: https://www.fitchratings.com/
12. Finnish Broadcasting Company (Yle)
    1. Finland to See Slight Rise in Housing Prices and Rental Costs, PTT Predicts: https://yle.fi/
13. The Helsinki Times
    1. Saarikko's Idea to Reinstate Deduction for Mortgage Interests Rejected by Experts: https://www.helsinkitimes.fi/

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