Source: SRV’s January-June 2025 Half-year Report published on 8 August 2025
Tighter trade policies and uncertainty about international economic development weaken the outlook for Finland's economic growth. According to the Bank of Finland's June forecast, Finland's economic growth will amount to 0.5 per cent this year and accelerate to 1.5 per cent in 2026. In 2025, private consumption remains cautious, private investments are declining slightly and the labour market is weak. Employment will pick up gradually as the economic climate improves, and moderate inflation and falling interest rates will boost the purchasing power of wage earners; as a result, private consumption will swing to growth in 2026-2027. Finnish exports will rebound slightly in 2025, although trade policy tensions dampen demand. Exports will only strengthen significantly in the years ahead, driven by growth in export markets. The deficit in public finances will contract this year, but tax cuts and rising defence spending will weaken the balance in coming years (source: Bank of Finland).
The eurozone economy is overshadowed by the uncertain trade policy situation. Inflation has become more moderate, hovering at the target level, and the ECB continued to cut interest rates in spring 2025. At its June meeting, its Governing Council lowered the key interest rate to 2.0 per cent. This rate is crucial to the market. The markets expect that the cycle of falling interest rates will level off, as the three-month Euribor has settled lower than longer-term interest rates (source: Bank of Finland).
The balance figure for the consumer confidence indicator was -8.6 in June. Consumer confidence remains low as the long-term average for the indicator is -2.6. Consumers’ expectations for the Finnish economy and their own finances were muted, and declined compared to earlier months. They were not planning to spend much money on consumption and their intentions to buy a home remained at a low level. In addition, the outlook for unemployment was weak and they felt that losing their job posed a high threat (source: Statistics Finland).
This year, construction will rebound from its all-time low with growth of 4 per cent. The pace of growth is expected to accelerate in 2026. Sales of old residential units have already picked up slightly, but sales of new units remain low. Due to the slowly shrinking inventories of finished residential units, many new housing projects are being kept on hold. The amount of state-subsidized housing construction will decline in the coming years. It is estimated that 20,000 units will be started in 2025 and 24,000 in 2026. The number of housing starts in the years ahead will fall clearly short of the need for homes; according to a new study by VTT, 31,000–36,000 homes will be needed per year over the next twenty years. Business construction, which has shored up construction activity, will swing to growth this year. Many large-scale projects are under way in public construction, and industrial construction is boosted by data and security projects. There are many candidate projects but there is a risk that projects may be postponed due to uncertainty (source: Confederation of Finnish Construction Industries RT).
The number of real estate transactions swung to substantial growth in the second quarter, and the number of real estate transactions rose to EUR 1.7 billion in the first half of the year. Two thirds of the transactions were made by foreign investors and half focused on the Helsinki metropolitan area and its surrounding municipalities. The property types with the highest transaction volume were public buildings, housing and commercial premises. Higher return requirements combined with falling market rates of interest will create a foundation for the gradual normalisation of the transaction market (source: KTI).
SRV’s view of the market situation and its impact on the company’s operations is that the market for private-sector projects will remain challenging in the near future, but there are signs of a turn for the better. Real estate investors' transaction volumes in the housing market are on the rise. That said, their interest is still primarily focused on completed properties. Interest rates are no longer a significant hindrance, but vacancy rates remain somewhat high, and thus the demand for new construction projects is still limited for the time being. Consumers’ purchasing power has strengthened, thereby improving their
opportunities for buying a residential unit. This shows as improvement activity in the housing market, although, uncertainty about the economy is still weighing down on home-buying intentions. The preconditions for starting up development projects for business premises vary widely from one location to another. Demand among investors and tenants remains rather limited, but as interest rates remain moderate and Finland's GDP develops favourably, demand is expected to gradually strengthen. There are still public sector projects on offer, which supports construction volumes.
SRV’s January-June 2025 Half-year Report published on 8 August 2025