OP Pohjola's economists forecast home prices to rise by one per cent this year and 3 per cent next year, said OP in a press release on Tuesday.
Price developments involve both negative risks and opportunities for a faster recovery.
At the same time, consumers' economic pessimism is one reason why the housing market remains weak.
The housing market has been expecting prices to rise for the second year, but a turnaround has still not been seen.
However, several factors that significantly support housing demand have already changed and household incomes have increased and loan interest rates have decreased. This would provide grounds for stronger home price developments.
On the other hand, unemployment has risen to high levels and consumer confidence is still clearly weaker than normal.
"Home price developments react quite slowly to economic changes. Both sellers and buyers are slowing down the movement. Owners don't want to sell their homes at a loss, especially if they have a lot of debt and the sales price threatens to be less than the loan amount. Buyers, on the other hand, may expect prices to fall further, which reduces demand," said OP Pohjola Senior Economist Joona Widgrén.
In the housing market review, OP Pohjola economists examined the relationship between consumer confidence and home prices. They made a simplified calculation of price developments, in which in an alternative world, consumer confidence would have risen to its long-term average level and everything else would have remained the same.
Based on the calculation, the drop in home prices last year would have been 0.5–1 percentage points lower than it actually was.
"I see uncertainty as one factor in the sluggishness of the housing market. In our calculation, stronger confidence would be associated with slightly stronger price development. In reality, however, stronger confidence would likely be accompanied by stronger economic development in other aspects as well, which would support the housing market more broadly," Widgrén added.
In the housing market, the end of 2025 continued in a similar way to the whole of last year. Prices were slightly down compared to a year ago. The number of home sales was approximately 13 per cent higher last year than the previous year.
"The fastest decline in home prices is behind us and sales volumes have clearly risen from their lows. In future, we expect that sales volumes will increase slightly and prices will finally turn to a moderate upward trend," said Widgrén.
In the last quarter, regional price developments were fairly uniform. Compared to the same period a year ago, home prices in large cities fell by 3.4 per cent, and they fell even more sharply in Turku and Espoo than in other cities.
Oulu, on the other hand, stood out with slightly better price development than other large cities. Outside growth centres, prices fell by an average of 3 per cent.
The development of rents for non-subsidised apartments turned negative throughout the country at the end of the year.
Compared to a year ago, the drop in rents was steepest in Vaasa and Lappeenranta. The decline in rents accelerated in university cities, especially compared to the previous quarter. Rents have been falling for a long time in relation to households' disposable income.
"The decline in rents is largely a result of the heavy construction before last year. The discussion about a housing shortage can be forgotten for now. A possible housing shortage would be reflected in rents by pushing them up, and the current development suggests that there has not been a shortage anywhere in the country. However, if construction remains low in the longer term, the situation may change," Widgrén said.
This year, home prices are predicted to rise by one per cent. In 2027, the rise will intensify and prices will increase by 3 per cent. The development of the housing market is supported by stabilised interest rate developments and rising household incomes.
On the other hand, labour market developments are slowing down the rise in prices, but the situation will begin to ease, especially in 2027. However, a better financial situation for households would enable a clearly stronger recovery in the housing market.
"The financial situation of households has clearly improved due to falling interest rates and rising incomes. The opportunities for buying a home have clearly improved compared to a couple of years ago. Although economic indicators speak for themselves, uncertainty seems to be holding back home buyers," Widgrén added.
- Housing market
- Weak
- OP
Source: www.dailyfinland.fi
