Review of the operating environment and housing market

The increase in the number of small households, urbanisation, the aging population and immigration have increased demand for rental apartments in growth centres, particularly that for small apartments in urban areas. Finland’s economic growth picked up in 2017, and the volume of residential construction was at a record high level. Complementary construction near existing services and good public transport connections makes it possible to build more affordable homes.

The past year will remain in history as a record-breaking year for new residential construction projects. With the ongoing urbanisation and continued popularity of urban living, apartments are being built particularly in SATOs main areas of operation: the Helsinki metropolitan area, Tampere and Turku. The broader range of rental apartments has alleviated the pressure to increase rents. However, the pressure to increase rents has increased as a result of the development of energy and property taxes and water tariffs.


Driven by the global economy, the Finnish economy is continuing to grow rapidly, and its near-term growth outlook has been adjusted upwards to around three per cent. Growth has expanded into all sectors of the economy, and the volume of goods and service exports has increased markedly.

The eurozone economy is also on a good growth path, and the growth rate for 2017 is outperforming earlier forecasts. The IMF is forecasting a growth rate of around two per cent for the eurozone for 2017. The forecast is supported by loose monetary conditions and the relatively stable growth of the global economy. Trust in the economy is strong across the eurozone, including Finland. As a result of a long downturn and slow recovery, Finland’s GDP is significantly lagging behind that of other countries, where economic growth picked up much earlier, so Finland has some catching up to do.

Trust in the global economy is strong, with the most significant near-term risks being political by nature. A great deal of uncertainty is related to Brexit and the financial policy of the new US administration, and geopolitical conflicts are also creating uncertainty for the global economy.


Russian GDP resumed growth in 2017, supported by the increase in the price of oil, and its moderate growth is expected to continue in the near future. The inflation rate decreased to a record low level (4.0%), and is expected to remain low in 2018. Economic growth and slower inflation have strengthened household trust, and private domestic demand began to recover after having decreased for two years. Investment demand remained low and continues to be limited by high financial costs and the uncertain economic outlook. Russia’s national economy still involves a number of risks related to geopolitics and the prices of raw materials.


Despite the strong economic growth, the labour market has recovered slowly, albeit steadily, as more and more Finns have been able to find employment. According to Statistics Finland’s Labour Force Survey, employment has been increasing for two years, but the number of employed people has only increased by 35,000 since the low point reached in mid-2015.


Consumer trust in their own finances and in the Finnish economy has remained at a record high, and consumers are optimistic about the development of employment. This is reflected in the increase in private consumption. Private consumption is expected to increase more rapidly than income levels, by more than two per cent, which is why household indebtedness will continue to increase as well.


The inflation rate has remained moderate, despite the economic growth. The inflation rate picked up in early 2017, but has since stabilised. The historically loose financial policy from the central banks continues to keep short-term reference rates at an exceptionally low level. Economic growth and inflation expectations will probably cause the European Central Bank to tighten its financial policy, in line with the United States, after the economic upturn. Longer-term rates are expected to increase first.


More than 900,000 removals are carried out in Finland annually, most of which take place within a municipality. The largest cities also attract people moving from other parts of Finland, most of whom are young people. Of the entire urban population in the country, nearly half are living in urban areas in the six largest municipalities, and more than half of Finns are living within a radius of 200 km from Helsinki.

The steady growth of the Finnish population and the increasing pace of urbanisation pose challenges to residential production and continue to polarise apartment prices. According to the conservative scenario of VTT Technical Research Centre of Finland, the population in the 14 biggest cities will increase by 486,700 people between 2015–2040 and by 642,500 people according to an urbanisation forecast.

According to preliminary information from Statistics Finland, the Finnish population grew by around 6,500 people in 2017, which is a smaller increase than in 2016. The main reason for this population growth was immigration, as the number of people moving in was approximately 8,200 higher than the number of people moving out. According to an estimate by the Housing Finance and Development Centre of Finland (ARA), around 90 per cent of immigrants are living in urban-like municipalities, and around half of asulym seekers will move to the Helsinki metropolitan area within a few years. There were 1,513 more births than deaths in Finland. The population of Finland is around 5.5 million.


Net immigration


The trend of urban living is reflected in the demand for apartments. During the economic downturn, the decentralisation development of urban regions and the strong growth of their surrounding municipalities were replaced by growth within urban centres and complementary construction. The popularity of urban living has created a shortage of small apartments and caused the demand for family apartments to increase. Many have several apartments in different locations, which increases their living space.

According to Statistics Finland, there were around 1,131,000 single-person households (669,000 in 1991) and around 2,012,000 single-person or two-person households (1,280,000 in 1991) in 2016.

The share of one-person and two-person households out of all households is around 75 per cent in the entire country and around 80 per cent in Helsinki. The number of one-person households is highest among young people and the elderly. At the same time, the number of children in Helsinki is higher than it has been since the mid-1970s.

The demand for apartments is higher than their supply in Helsinki, particularly in the city centre and its surrounding areas. If apartments can be built in areas with the highest demand, price pressures will decrease in a wider area. According to the city plan approved for Helsinki in 2016, the city is preparing for more than 200,000 new residents by 2050. One-third of the need for new apartments is planned to be covered through complementary construction. In addition, residential areas will need to be made tighter, particularly at rail traffic hubs.

Average size of households

Communal housing solutions are being developed, and shared facilities, such as saunas, are being built in apartment buildings again. Flexibility to changing needs is increasingly considered to be important in terms of apartments.

HIGH RATES OF investment in construction and production

The review period will remain in history as a record year for residential construction. The number of new residential construction projects was higher than it had been for more than 20 years. According to an estimate by the Confederation of Finnish Construction Industries (RT), construction volume increased by around four per cent in 2017, with the number of new construction projects being 43,000. New apartments are being built particularly in the largest centres in SATOs main areas of operation. The increase is expected to stabilise but still remain at a high level in 2018. The availability of skilled employees is the most significant bottleneck for increasing the volume of new and renovation constructions. The rate of renovation construction decreased slightly from the previous year.

Housing starts


According to a study by KTI Property Information, the favourable development of the real estate market focuses on the largest cities in terms of investment, construction and the rental market.

The number of rental apartments has slowly increased, and they numbered approximately 850,000 of the 2.6 million permanently occupied apartments. About half of these were owned by private persons. A quarter of the entire population, and nearly half of the population of the largest cities, live in rental apartments. In Helsinki approximately 45 per cent of the population live in rental apartments.

After the impressive number of transactions in 2016, the housing investment market developed more moderately in 2017. Regional differences in the development of apartment prices continue to grow.

According to preliminary information from Statistics Finland, the prices of apartments in old apartment buildings and terraced houses increased by slightly more than one per cent in the Helsinki metropolitan area in 2017, while decreasing slightly in other parts of the country, in comparison with 2016.

Finland remains interesting to international investors, as its economic situation is improving and its expected net return level (3.8%) is higher than that of many other countries. International investors are mainly interested in opportunities in the Helsinki metropolitan area. The volume of major apartment portfolio transactions in 2017 will be markedly lower than the record level achieved in the previous year. However, increased household demand is likely to compensate for any decrease in international investments in Finland.

Parties that own rental homes



Relative prices



Demand continues to be higher than supply in most growth centres, and changes in housing support, among other factors, have increased the need for small rental apartments in particular.

In some areas, an increased supply of rental apartments has reduced pressures to raise rent levels, but rents have increased as a result of higher costs arising from property management and maintenance. Higher property taxes, energy prices and water tariffs related to SATOs apartments have increased such costs by nearly 40 per cent over the past five years.

According to Statistics Finland, the annual increase in rents of privately financed apartments was around 2.3 per cent in the Helsinki metropolitan area and 2.4 per cent in other parts of Finland. Rents of ARA apartments went up by 2.6 per cent throughout the country.

In line with its strategy, SATO continues to focus on apartments in growing urban regions. Rent levels are expected to continue to develop moderately. The change in the average rent of our apartments per square metre was slightly less than one per cent in 2017.

Rented housing stock

Share of rental homes


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