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According to Statistics Finland, the number of young adult households has been declining since the beginning of 2024, and this trend continued into early 2025. In addition to the growing popularity of shared living, some young people may have postponed moving out of their parental homes due to the impacts of benefit reforms. The consequences of the student benefit reform are clearly visible in the occupancy rates of student housing across Finland: usage rates have reached record highs, and in many locations, student apartments—including shared units—are nearing full capacity. According to Nordea, the tightening of housing benefits has led to a concentration of renters, which in turn is slowing the correction of oversupply in the private rental housing market.
Traditionally, the second quarter of the year is the most challenging period for residential real estate investors in the rental market. Occupancy rates typically hit their annual lows during this period. This year, signs of that trend are again evident in major cities outside the Helsinki Metropolitan Area: KTI data shows occupancy rates declined between the first and second quarters, reflecting typical seasonal variation in the rental market. In contrast, the trend in the Helsinki region diverged from that of recent years.
In the second quarter, occupancy rates rose in the Helsinki Metropolitan Area, narrowing the gap with other major cities. The quarter in the capital region was clearly stronger than expected. Finland’s largest landlords currently estimate that the rental housing market is gradually entering a phase of recovery. However, supply remains high. The sharp decline in construction is expected to inevitably tighten housing availability and push up occupancy rates in the coming years. The increase in occupancy rates in the capital region during Q2 already offers a preview of this,” summarizes Retta Management’s property analyst Anton Takkavuori regarding the rental market situation.
A key issue surrounding Finland’s housing production target continues to be how net immigration develops annually. Recent years have been exceptional in terms of record-high net immigration. While net immigration has declined from its peak, it remains historically high. Achieving the upper end of Finland’s housing production target—approximately 35,000 dwellings per year—would require net immigration of about 40,000 residents annually.
The future path of net immigration remains uncertain and divides expert opinion. According to ETLA, annual net immigration may stabilize at around 24,000 people, while Statistics Finland’s recent forecast expects it to stay around 40,000. Immigration researchers Pasi Saukkonen and Rasmus Aro do not believe immigration will continue at the same levels assumed in Statistics Finland’s population forecast.
The rolling 12-month net immigration figure still exceeds 40,000, which is significantly more than in pre-pandemic population forecasts, where the expectation was only 15,000 people per year. Immigration has become increasingly significant for the rental housing market, as nearly three-quarters of foreign-language households live in rental housing, mostly in apartment buildings. For example, according to the City of Helsinki, a large share of residents with foreign backgrounds live in rented housing. In recent years, the share of those living in private rental housing in particular has grown substantially.
The share of foreign investors in Finland’s real estate market has grown steadily, according to statistics from the Bank of Finland. In 2010, they held just over one-fifth of the total value of Finnish real estate, but by 2024, their share had risen to over one-third. Despite the war in Ukraine, there have been no clear signs that Finland’s country risk has increased from the perspective of foreign investors. On the contrary, interest among foreign investors has remained stable—or even strengthened.
According to KTI, the structure of players in the property investment market has undergone a major transformation as the market has grown. Foreign investors have increased their Finnish property holdings year after year, surpassing domestic institutions as the largest investor group in 2017.
The amount of real estate investments by foreign investors also grew in 2024. Over the past decade, foreign investors have accounted for an average of 52% of annual real estate transactions. These figures make Finland one of the most international property investment markets in the world. As a result, the recovery of the Finnish market is more dependent on developments in international investment activity than many other countries. Movements by foreign investors should therefore be monitored closely as the market reaches a turning point.
Investors have used various strategies to respond to the abundant supply prevailing in the market. Some have protected current cash flows by keeping rent increases moderate and focusing on maintaining high occupancy. Others have prioritized securing future cash flows by raising rents, even though this has resulted in lower occupancy rates.
As the market gradually recovers, professional investors will again be able to increase occupancy. In this light, raising rents at the cost of lower occupancy may have been a financially justifiable strategy, according to Inderes. However, a stronger conclusion would require a more detailed analysis of cash flow losses caused by vacancies and a deeper understanding of the housing stock structure. In any case, there is clear upward potential in rent levels for the coming years, supporting the currently more moderate return expectations
Benefit reforms add further complexity to the market. Although housing production has declined sharply, the oversupply in the market has not yet significantly corrected. In particular, the growth in the number of young households has stalled, and student benefit changes are prolonging the rental market’s adjustment process.
“In Q2, market challenges continued especially in major cities outside the Helsinki region. In Oulu, recent quarters have been a true Via Dolorosa: in Q3 of 2024, Oulu still had the highest occupancy rate among major cities at 97.5%. Now, in Q2 of 2025, the rate has dropped to 91.7%, with only Vantaa (91.0%) showing lower numbers. Typically, Q3 benefits from both internal migration within the country and immigration, both of which peak during the summer months. Based on these factors, we predict rising occupancy rates in Q3. Any other outcome would be a disappointment,” concludes Takkavuori regarding Q3 prospects.
Figures based on data from KTI, Nordea, Inderes.
Additional Information:
Anton TakkavuoriReal Estate AnalystRetta Managementanton.takkavuori@rettamanagement.fiPuh. 0400 853 528
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