The Pellervo Economic Research (PTT) think tank forecasts that pay growth will soon lag behind the rise in rents. In a report published on Thursday the research institute said that free market rents have increased more than property prices and other consumer prices over the past decade.
Last year, rents within the non-subsidised sector rose by 1.6 percent and are expected to grow by another 1.8 percent in 2019. Relative to incomes the amount that people pay in rent has also risen substantially, PTT added.
In Helsinki, Tampere and Jyväskylä, renters in the free market now spend more than a third of their income on rent. Meanwhile, rents in government-subsidised ARA buildings are essentially lower only in Helsinki.
According to PTT, the number of households living in rented properties has increased considerably faster than households living in owner-occupied homes in the past 10 years.
This trend is expected to continue, as renting is becoming increasingly common in big cities. In Helsinki, the number of households that rent exceeded owner-occupied properties in 2012, and the same will occur in Tampere and Turku in the next few years, according to PTT's forecast.
No interest in home buying
PTT listed several reasons for the increased popularity of renting. First, there is a fairly large supply of rental properties available because the construction of apartment buildings escalated after 2010. In addition, more and more new apartments are being bought by investors, who then rent them out.
Second, urbanisation has made renting more popular and many want to live close to cafés and restaurants in city centres. Renting a home is an easy, safe and flexible choice for those moving to Finland’s growth centres, according to PTT.
“In the capital region and in Tampere, people prefer to live centrally, even if their jobs are located further away,” PTT's economist Lauri Vuori said.
The report said that attitudes have also changed. For the younger generation, owning a home is not as important as it appears to be for older people.
Finally, the fact that property prices are very high in the most attractive areas has meant that not everyone can afford to buy a home of their own. For example, in the Tampere and Helsinki areas, property prices have grown markedly faster than incomes – a development that is set to continue, according to the think tank.
A majority of tenants are under 35 and live in low-income households either alone or with another young person. Single parents also make up a large share of renters, the think tank noted.
PTT is backed by the Central Union of Agricultural Producers and Forest Owners (MTK), which has traditionally been aligned with the Centre Party.