Source: SRV’s January-June 2026 Interim Report, published on 8 August 2026
Finland’s macroeconomic environment
According to the Bank of Finland, the Finnish economy is on the verge of a turnaround. During the first half of the year, economic growth strengthened all across the board, driven by exports, investments in production and an upswing in private consumption. Although the sharp rise in energy prices caused by the war in Iran will push inflation up to 2.4 per cent in 2026, this energy shock is expected to be only temporary. At its meeting in June 2026, the Governing Council of the European Central Bank decided to raise all three of its key interest rates by 25 basis points, and short- and medium-term market interest rates in particular have risen. At its July meeting, the ECB kept its key interest rates unchanged, but noted that the outlook for energy prices was highly volatile. Although consumer confidence remains weak, it is showing signs of improvement, and the household savings rate has remained high.
Conditions in the construction market will begin to improve in 2026–2027, although uncertainty will remain high over the short term. The main near-term risks include accelerating inflation and rising interest rates, which will have a negative impact on construction demand across a range of market segments. In addition to geopolitical uncertainty, the weak Finnish economy and public debt pose risks to the development of the construction market, which may lead to slower-than-expected recovery.
Non-residential construction
Contracting
Public-sector demand continues to drive the market for non-residential contracting. Demand has remained stable at a good level. Investments in defence, security of supply and public services will continue to support the market for contracting over the coming years. Data centres represent a rapidly growing segment in projects led by private developers. Several projects are now at various stages of development, and their implementation could present significant opportunities for construction companies. Although uncertainty may continue to delay individual investment decisions, this segment is supporting overall demand in the construction sector.
Non-residential development projects
Launching development projects requires a functional investor and tenant market. The gradual stabilisation of economic and financing conditions is essential for the launch of development projects. Investor demand for non-residential real estate projects has gradually recovered in the wake of positive economic developments in Finland. However, the instability in energy markets caused by the war in Iran, coupled with the resulting rise in interest rates, is having a negative impact on investor demand. Investors' yield expectations remain relatively high, and the risk of rising interest rates will push these expectations even higher. Although the most challenging times are behind us, and we are now slightly better placed to launch new projects, the market remains thin and polarised in certain segments. However, there is some demand for selected projects.
Residential construction
Investor market (residential development projects)
Transaction volumes in the real estate market saw significant growth in early 2026, and in particular due to the sale of both Ilmarinen’s and Varma’s residential portfolios. Some previously closed-end real estate funds were reopened, and new real estate investment funds targeting professional investors are also appearing on the market. However, turbulent energy markets are posing a risk to inflation and interest rates, which is in turn having a negative impact on investor demand.
One key factor for residential development projects will be the gradual reduction of oversupply in the housing market, which will largely depend on trends in the number of households in cities. Cities are continuing to grow in terms of population, but changes to housing allowances – and particularly housing arrangements for young people – coupled with a relatively high level of state-subsidised residential development have hindered the reduction of this surplus. One key challenge facing the investor market is also linked to an oversupply of rental housing, and small apartments in particular. Abundant supply and high vacancy rates have hindered rent growth, while construction and maintenance costs have remained high. This has reduced the potential return on investments, and made investors more cautious about launching new residential rental projects.
Consumer market (developer-contracted residential construction)
According to the Federation of Real Estate Agency (KVKL), total sales of residential units in January–June 2026 were approximately 13 per cent less than during the same period of the previous year. Sales of new builds have remained extremely sluggish throughout the first half of the year, and monthly sales volumes have been significantly lower than in the previous year. According to Statistics Finland, prices for older apartments continued to fall during the second quarter, although this mainly applied to smaller apartments. Price trends for units with three or more rooms were more stable.
The housing market is still being burdened by weak consumer confidence, falling prices and rents, and existing housing stock – which all mean unfavourable conditions for launching new projects. According to our estimates, the low number of startups coupled with population growth in key urban areas will gradually help to reduce oversupply.
Subsidised housing
State-subsidised housing (ARA/Varke) has accounted for the vast majority of new residential construction projects. The number of state-subsidised projects is set to decline in the near future, which will have a negative impact on short-term demand for residential construction. However, this decline in subsidised construction will strengthen private residential construction in the long run, as a decrease in the supply of new subsidised rental housing will increasingly shift demand towards private projects.