Reader ‘s opinion Only a third of the price of the apartment is construction costs

Zoning, its speed and the availability of plots play an important role in growth centers.

Although the real economy has been in recession due to the covid-19 epidemic, old home prices have still risen in the metropolitan area since september last year by five per cent. Elsewhere in Finland, the decline has been one per cent.

Comparing the price of housing with disposable income in Finland, only about four per cent of the population spends more than 40 per cent of their income on housing. Housing prices vary significantly both across Finland and regionally.

According to Statistics Finland, construction costs have increased by only ten percent in the last 20 years. However, real house prices in the metropolitan area have risen by 70 per cent over the same period. This is due to the sharp rise in land prices.

The price of the apartment consists of land, construction and taxes. The share of the plot is about 20-30% depending on the location. The second third of the price consists of taxes and parafiscal charges. Value added tax, transfer tax and property taxes are included, as well as payroll taxes and employment pension contributions, among others. In good locations in the metropolitan area, land and taxes can account for up to 70 percent of the price of an apartment, and only 30 percent is generated by the construction itself.

About 70 percent of construction costs are spent on reaching baseline. The rest of the costs include solutions to improve the appearance, technical or operational quality of layout regulations and other qualitative requirements. The general level of quality in housing has improved.

Zoning, its speed and the availability of plots play an important role in growth centers. Zoning is a monopoly of municipalities and cities and a key tool for regulating the quantity and quality of housing construction. Zoning affects the price of housing through both zoning regulations and the availability of plots.

Financing also affects the availability of housing and thus the price, even if interest rates are low. Banks’ solvency requirements have increased, which has reduced RS funding for non-subsidized housing developers. In this way, it has naturally affected the supply of housing and thus also the price of housing.

Housing pricing depends on many factors. Taxes are unlikely to decrease, and there is not much room for maneuver in the 5 percent operating profit of construction either. Digitalisation can bring efficiency to construction. The plots and zoning will therefore be at the center.

High-quality and effective zoning is key to meeting the challenge of urbanization. It has a key price effect through zoning regulations, and at the same time it is a key factor in the availability of land and housing.

Timo Kohtamäki

Chairman of the Board

Miimu Airaksinen

managing director

Finnish Association of Civil Engineers RIL ry

Reader opinions are speeches written by HS readers, selected and delivered by HS editorial. You can leave a comment or read the principles of writing at www.hs.fi/kirjtamielipidekirjoitus/.

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