Finland's housing market remains feeble

House prices fell by 0.78% y-o-y in Q2 2020

The average price of dwellings fell by 0.78% during the year to Q2 2020, following y-o-y declines of 1.33% in Q1 2020, 2.69% in Q4 2019, 0.89% in Q3 2019, and 1.06% in Q2 2019. Quarter-on-quarter, house prices rose by 1.11% in Q2 2020.

Demand is plunging; construction activity mixed 

In the first half of 2020, total transactions of old dwellings fell by 17.6% y-o-y to 25,438 units, following a 1.4% increase in 2019, according to Statistics Finland. 

Dwellings starts in residential buildings surged by 25.9% y-o-y to 17,602 units in the first five months of 2020 while completions were down by 17.5% to 12,349 units. 

Finland has suffered several years of very low growth. At the heart of Finland's problems has been the inability of Nokia to compete. Between 1998 and 2007, Nokia was responsible for 20% of all of Finland’s exports; but by mid-2012 Nokia was almost bankrupt, and its contribution to Finnish GDP was actually negative. Over 40,000 highly-skilled Finnish ICT workers were unemployed. Aside from Nokia’s weakened activity, exports were plagued by the economic recession in Russia ― Finland’s major trading partner.

However the economy has improved gradually in recent years, with the unemployment rate falling to 6.7% in 2019, the lowest level since 2008.

Rents, rental yields: moderate yields in Helsinki at 4.11% 

Helsinki apartment costs are around €6,609 per sq. m.

Recent news. The Finnish economy shrank by 4.9% year-on-year in Q2 2020, following a 1.1% fall in the previous quarter, amidst the COVID-19 pandemic, according to Statistics Finland. On a quarterly basis, real GDP declined 3.2% in Q2 2020, worse than the previous quarter’s 0.9% drop and the biggest contraction since Q1 2009. As such, the economy is projected to contract by 6.3% this year, in contrast to a 1.1% growth in 2019, based on the European Commission estimates.