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A recent study conducted by the Finnish Homeowners Association has revealed that the cost of housing in Finland is increasing at an unprecedented rate. The study discovered that local fees and charges are still on the rise, with the province of Northern Ostrobothnia’s Kalajoki experiencing the greatest increase, with costs soaring by nearly €3,700 ($4,400) in just one year. The average increase in housing costs, including electricity, water, waste disposal charges, and property taxes, over the past year is €1,671 ($1,989). The increase in housing costs and the significant differences between municipalities are primarily due to the price of electricity, which has risen by an average of 46% from a year ago, as well as waste disposal charges, which have increased by an average of 6.7%, property taxes by 6.3%, and water charges by 4.1%
According to the study, the municipality with the highest housing costs in Finland is Laukaa, located in the Jyväskylä region, where the annual costs amount to €8,466 ($10,083). Following Laukaa, the most expensive municipalities for housing costs are Lempäälä, Ylöjärvi, Asikkala, and Pirkkala. The study assessed 100 municipalities across Finland and discovered that the cheapest municipality in terms of housing costs is Kittilä in Lapland, with costs amounting to €4,681 ($5,573) per year. Thus, there is a difference of €3,785 ($4,502) per year between the cheapest and most expensive municipalities, which has slightly increased from last year’s €3,361 ($3,996) difference. The study also noted substantial differences in other expenses across municipalities, such as the highest water charges in Parikkala, costing €1,651 ($1,965) per year, and the lowest water charges in Kempele, costing €549 ($653) per year.
As per the study, the municipalities of Asikkala and Heinola have the highest waste disposal charges, which amount to €391 ($465), whereas the lowest charges of €133 ($158) are in Tampere and its nearby municipalities of Kangasala, Pirkkala, Nokiala, and Lempäälä. The implementation of municipal waste management has resulted in cost reductions in some municipalities, such as Sysmä, where costs have decreased by 21%. The study emphasizes the necessity for government intervention to tackle the issue of increasing housing costs and encourage the availability of more economical housing.
The housing market in Finland is experiencing a decline in demand, which is being attributed to rapidly rising interest rates. According to Statistics Finland, the number of total transactions for old dwellings in the first three quarters of 2022 dropped by a significant 22.6% compared to the same period last year. Sales transactions also fell by 21.5% in Greater Helsinki and by 23% in the rest of the country. While residential construction activity has shown mixed results, with dwelling completions rising by 4.7% over the same period, dwelling permits and starts have fallen by 17.7% and 6.6% year-on-year respectively.
As a result of these factors, the Finnish housing market is expected to continue to weaken in the medium term, with house prices projected to increase by just 1.5% this year before falling by 0.5% in 2023. The Mortgage Society of Finland predicts a decline in house prices by the end of this year, while financial services provider OP Financial Group projects a decline of 1% to 3% next year. Rising interest rates, eroding economic confidence, and increasing costs are all weighing down on the market mood, according to OP Financial Group.
Foreigners are allowed to purchase secondary residential properties in Finland without obtaining a permit, however, they need permission to buy property in the Province of Aland (Ahvenanmaa). The Finnish economy is projected to slow down during the remainder of the year, with the Bank of Finland forecasting modest growth of 2.2% this year and a contraction of 0.3% in 2023. The European Commission expects growth of just 1.8% in 2022 and 1.2% in 2023, which is a significant slowdown from last year’s 3% expansion.
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