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Covid pushed house buyers to the suburbs - but city housing costs remain high

June saw record numbers of mortgage applications in Finland as people put their pandemic savings into the housing market.

Ilmakuvassa on Helsingin Kalasatama toukokuussa 2021.
Despite strong supply of new housing, prices have continued to rise Image: Silja Viitala / Yle
Yle News

While the coronavirus pandemic has seen a rise in people moving out of cities, house prices in Finland's growth centres have continued to rise, according to Peetu Keskinen, an economist at Pellervo Economic Research (PTT).

Helsinki, Tampere, Turku and Oulu are among the Finnish cities that have seen an outflow of people to their outskirts over the course of the pandemic.

In January-June of this year municipalities located near large urban areas were the most sought after locations for home movers, Timo Aro, a leading specialist at regional development consultancy MDI, told news agency STT in early August.

Tuusula, Järvenpää and Sipoo, all located around 30 kilometres from the centre of Helsinki, and Kaarina, 10 kilometres from the centre of Turku, gained the most new residents in the first half of 2021.

The pandemic showed that the trends of the 2010s, which saw continued migration from rural to urban areas of Finland, were reversing, Aro said.

Record mortgage lending in June

"The message from banks has been that there have been a lot of loan applicants," Keskinen said.

However, he added that Finland is not on the verge of a housing market price bubble like Sweden. In Sweden, house prices have developed more rapidly than in Finland, due to Sweden's looser lending policy. As a result, prices in larger urban areas have risen rapidly.

Finland's urban centres remain attractive, Keskinen said, with the number of prospective buyers sometimes outstripping the available housing supply.

"When vaccination coverage gets to a good level, people will certainly want to go to work and see other people," Keskinen said.

Middle income earners who were able to save money during the pandemic were a major factor in June's record mortgage lending.

"When the majority of the service-dependent economy is shut down, one place to spend money is the housing market," Keskinen said, adding that some of those savings went towards both renovation work and buying new homes.

Price movements during the interest rate pandemic have varied from city to city, PTT found, influenced by factors such as the state of the labour market. In the southeastern city of Kotka house prices initially fell, but later returned to normal.

High price levels may drive people out of growth centres

Keskinen also called for action to ensure that Finland's cities remained affordable.

While rates of housing construction are relatively high, especially in Helsinki, so is demand, which is why the increase in housing supply is not reflected in falling prices.

"Some people are forced to live in Helsinki for work or school, which puts them on an unequal footing with those living in cheaper areas, a problem that should be addressed in the coming decades," he said.

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