The housing market is still coughing, even though household purchasing power has improved. The construction of new privately financed housing has been paralyzed for three years, which is negatively reflected in growth conditions, employment and tax revenues. Swift action is now needed to strengthen consumer confidence and the conditions for housing production, the Finnish Construction Industry RT presents at its autumn meeting.
According to a study by VTT, Finland needs 31,000–36,000 new homes annually to keep up with the population growth in growth centers. However, 2026 is expected to be the fourth consecutive year when construction starts will fall below 20,000 homes.
"Reaching even the initial number of twenty thousand apartments would require a doubling of privately financed apartment building production from this year, because state-subsidized housing production will decrease significantly," CEO of the Finnish Construction Industry Federation RT Aleksi Randell toteaa.
The exceptionally poor situation in housing construction is not due to any single factor, but to the accumulation of several significant challenges and the specific characteristics of the Finnish housing market. The market's recovery from the interest rate and inflation shock is slow in a weak economic growth. General uncertainty has kept consumer confidence depressed.
The Finnish Construction Industry Association (RT) expects concrete and quick-acting solutions to bottlenecks from the housing construction and financing study group launched by the government last spring.
"Slow economic growth does not provide sufficient support for the housing market and the start-up of privately financed housing production. We need to instill confidence in households and create incentives for buying a home. Access to financing must be made easier for both home buyers and builders, which would enable projects to start," says Randell.
New solutions are needed for financing
The tightening of access to finance is due to a significant tightening of regulations and the effects of the prolonged economic downturn on construction companies. Financing problems also affect renovation construction, which is falling far behind the targets for improving the energy efficiency of buildings.
The decisions made by the government during the mid-term elections, including raising the maximum duration and loan ceiling for housing loans, are important, but not sufficient in this situation.
Randell cites examples of ways in which the housing market can be supported quickly. Eliminating the transfer tax would encourage home purchases and boost the housing market. If necessary, tax relief could be targeted at first-time home buyers or made temporary, so that it would not cause a permanent increase in spending. State guarantees for housing loans could also be increased and developed in a selective situation.
A fixed-term state guarantee for financing the construction of owner-occupied housing projects would be an effective way to address market deficiencies caused by tightening capital requirements and support the conditions for sufficient supply. A guarantee would balance the banks' risk and would certainly also strengthen consumer confidence.
"Housing construction must be brought to a level that supports the growth of the Finnish economy, labor mobility, and people's everyday lives. Every lost year threatens to create a housing shortage, especially in growing urban areas. When demand accelerates, new housing cannot be added quickly, because their construction takes at least a year and a half."
Housing construction is a significant employer and tax revenue generator. Taxes and tax-related payments account for over 40 percent of the price of a new home. According to the new home construction customer satisfaction survey, buyers of new homes are also very satisfied with their purchase.
More information
Aleksi Randell
CEO
aleksi.randell@rt.fi + 358 9 129 9201Confederation of Finnish Construction Industries (CFCI)
Assistant: Lotta Räty
Merja Vuoripuro
Director, Communications and Responsibility
merja.vuoripuro@rt.fi + 358 40 587 2642Confederation of Finnish Construction Industries (CFCI)