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Housing Price and Investment Dynamics in Finland

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  • Christophe André
  • Clara García

Abstract

The Finnish housing market is volatile. After declining significantly as the global financial crisis unfolded, housing prices and investment recovered to reach new peaks. This paper uses a small econometric model to assess the role of fundamentals in housing price and investment developments. Current housing valuations and residential investment are broadly in line with the model estimates. Housing market volatility is exacerbated by fluctuations in the wider economy, which given its size and openness is vulnerable to external shocks. Structural features of the housing market also make it prone to volatility. The paper describes institutional characteristics of the Finnish housing market that bear on house price volatility and supply responsiveness. These relate to the structure of tenures, housing taxation and subsidies, social housing, financing, land-use planning, and competition in the construction industry. Prix du logement et la dynamique d'investissement en Finlande Le marché du logement finlandais est volatile. Après avoir diminué de manière significative durant la crise financière mondiale, les prix des logements et l'investissement résidentiel se sont redressés et ont atteint de nouveaux sommets. Ce document de travail utilise un petit modèle économétrique pour évaluer le rôle des fondamentaux dans les évolutions des prix des logements et de l’investissement résidentiel. Les valorisations actuelles des logements et l'investissement résidentiel sont globalement conformes estimations du modèle. La volatilité du marché du logement est exacerbée par les fluctuations de l'économie, qui compte tenu de sa taille et de son ouverture est vulnérable aux chocs extérieurs. Les caractéristiques structurelles du marché du logement le rendent également sujet à la volatilité. Le document décrit les caractéristiques institutionnelles du marché du logement finlandais qui influent sur la volatilité des prix et la réactivité de l'offre de logement. Celles-ci concernent la répartition entre propriétaires et locataires, la fiscalité du logement et les subventions, le logement social, le financement, l'aménagement du territoire, et la concurrence dans l'industrie de la construction.

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File URL: http://dx.doi.org/10.1787/5k98rwldjr44-en
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 962.

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Date of creation: 23 May 2012
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Handle: RePEc:oec:ecoaaa:962-en

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Keywords: Finland; construction; mortgage markets; housing market; housing policies; housing prices; land-use planning; household wealth; property taxation; aménagement du territoire; fiscalité immobilière; politiques du logement; prix des logements; patrimoine des ménages; marché immobilier; marchés hypothécaires; Finlande; construction;

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