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Housing Price and Investment Dynamics in Finland

Author

Listed:
  • Christophe André

    (OECD)

  • Clara García

    (OECD)

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.

Suggested Citation

  • Christophe André & Clara García, 2012. "Housing Price and Investment Dynamics in Finland," OECD Economics Department Working Papers 962, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:962-en
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    File URL: http://dx.doi.org/10.1787/5k98rwldjr44-en
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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