Stock market gains offset housing slump, but wealth gap widens in Finland

Declining property values have impacted Finnish household wealth negatively, but the wealthiest have still seen gains through stocks and other investments.

Finnish household wealth has declined at a pace rarely seen, with a comparable drop last occurring three decades ago, according to Statistics Finland.

Median wealth in Finland peaked at nearly 109,000 euros in 2013 but had fallen to 96,000 euros by 2023. The downward trend, which began a decade ago, has continued.

Although Statistics Finland’s latest study concludes with 2023 data, insurance firm Lähi-Tapiola’s economist Hannu Nummiaro suggested that the decline in housing prices has persisted since then. However, he expects the market to soon stabilise.

With falling interest rates, Nummiaro forecasted a prolonged rise in property values. He also notes that investment returns and savings contribute to long-term wealth growth, though not all households benefit equally.

Property prices key to wealth trends

Wealth is measured by assets such as property, vehicles, holiday homes and stocks, minus any debts and liabilities.

Housing prices have continued to decline since 2023, with no clear rebound yet.

“Housing prices are bottoming out, the upturn has not yet begun,” Nummiaro told Yle.

While nominal prices showed slight upward movement late last year, Nummiaro emphasised the importance of real prices, which account for inflation.

Real prices indicate what a home’s sale price could buy in today’s market, a crucial factor in assessing financial security.

Crises make wealth fluctuate

The past few years have seen significant economic shocks in Finland. The stock market plunged in 2020 due to the pandemic, only to recover. Remote work then fuelled a property boom, sending prices up. This was followed by the war in Ukraine, which accelerated inflation, leading to high interest rates and a sharp drop in housing prices.

The last comparable period of wealth fluctuation occurred during Finland’s 1990s recession.

While prices in urban and growing areas are expected to rise, properties in rural areas may not regain their previous values. For homeowners in declining markets, maintaining wealth may require additional savings.

Stock market offsetting property losses

However, Finnish households now have better protection against housing market downturns than they did during the recession of the 1990s.

Nearly two million Finns now own at least some investment assets, compared to 1.4 million a decade ago.

While housing prices fell significantly, stock market investments ended in positive territory. Nummiaro noted that relying solely on property is risky, as local market trends and structural issues like damp damage can affect values.

“In the 2019-23 survey period, house prices fell by 17 percent in real terms across the country, while Helsinki Stock Exchange shares returned four percent in real terms over the same period, beating inflation and providing good diversification in total household wealth,” Nummiaro said.

As wealthier households tend to hold more stocks, they benefit more from stock market gains in absolute terms.

Growing wealth gap and inheritance trends

Finland’s ageing population is set to influence future wealth distribution. The number and value of inheritances are expected to rise as the post-war baby boomers pass on their estates.

Since wealthier individuals generally inherit more, this will likely further widen wealth disparities.

“It will be interesting to see when this starts to have a noticeable impact,” Nummiaro said.