1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Housing Price and Investment Dynamics in Finland

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.

English

Keywords: housing prices, Finland, construction, housing policies, property taxation, housing market, mortgage markets, household wealth, land-use planning
JEL: R38: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Production Analysis and Firm Location: Government Policy; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes; R31: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Housing Supply and Markets; G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages; R52: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Regional Government Analysis: Land Use and Other Regulations; L74: Industrial Organization / Industry Studies: Primary Products and Construction / Construction; E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth; R21: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
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