Helsinki may be threatened by a severe housing shortage in coming years, as significantly fewer new apartments being built now than during the peak years of the city's housing construction.
Helsinki's target for 2023 is 8,000 new apartments, but this is unlikely to be reached. By the end of October, only around 6,100 apartments had been completed in the capital.
According to Hanna Dhalmann, Helsinki's housing programme manager, the number of apartments that will be finished for occupancy over the next two years will clearly fall short of the peak years of 2020 and 2021, when more than 7,000 were completed annually.
Dhalmann estimates that production in Helsinki will reach 5,000–6,000 apartments per year during the foreseeable future.
"The main reason for the decline in housing construction is the difficult market situation," she told Yle.
The slowdown in construction has been influenced by a rapid rise in interest rates and construction costs, as well as the acceleration of inflation, which has depressed consumer confidence to a record low. People don't necessarily dare to buy an apartment in the current market situation.
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Current oversupply
There is currently an oversupply of apartments in the capital, says Dhalmann. However, even though construction companies have not sold many finished apartments and there are many vacant rental apartments, there may still be a severe shortage in the future.
The situation has also been complicated by the government's decision to stop granting interest subsidised loans for the production of new right-of-occupancy housing, according to Dhalmann.
A decline in construction of right-of-occupancy apartments will be reflected in the overall figures. For example, more than 17 percent of the apartments started in Helsinki this year were right-of-occupancy apartments.
The Housing Finance and Development Centre of Finland (ARA) has responsibility for government-subsidized rental and right-of-occupancy housing production.
"At the moment, there are few new starts of unregulated housing production, but state-supported ARA projects have started normally, or even more than in recent years," Hanna Dhalmann notes.
The slump in housing construction has not been as dramatic in the capital in other parts of the country. And, it is assumed that it will revived in Helsinki first, before it takes off again elsewhere.
"A record number of people have moved to Helsinki this year. As the demand for apartments recovers and the stock diminishes, housing production will also take off again," Dhalmann predicts.
She says the city has created conditions for the construction of approximately 8,000 new apartments annually, so once the market recovers, large-scale construction is possible.
Slump throughout the capital region
Housing construction seems to be slowing down badly in other parts of the capital region as well.
According to Vantaa's head of housing affairs, Elisa Ranna, the general decline in construction will be seen in Vantaa over the next couple of years.
"The number of construction approvals and apartment building starts is clearly lagging behind the level of previous years," she explains.
This year, Vantaa will not see a downturn, and Ranta believes that the city will meet its housing production target of 2,640 new apartments.
However, it seems that construction of new non-subsidised owner-occupied apartments is slowing down.
Many people who are considering buying an apartment are now taking a wait-and-see position. Ranta also believes that the presnt oversupply of apartments may turn into a housing shortage as production declines.
"As demand increases again, it may not be possible to respond quickly," she points out.
More than 5,000 new apartments will be completed in Espoo this year, which is clearly more than the annual target of 3,300 apartments. According to Anne Savolainen, Espoo's housing manager, the target will be reached next year as well.
Thereafter, a general decline in housing production may also be seen in Espoo.
Savolainen adds her voice to those saying that the current oversupply of apartments may turn into a shortage if construction declines over a longer period. During 2020–2021, Espoo saw more than 6,000 new apartment starts.
A record number of new residents moved to Espoo last year and the city has already made zoning provisions for a resurgence in housing construction when it starts.
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