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Study: Helsinki's land rent increases showed up in housing prices – but only after about a decade

Published: 9.11.2026

Apartment prices in Helsinki gradually adjusted to announced increases in land lease rents. New research shows that housing prices came to reflect the rent increases even before they took effect, once their impact in euros had been made public.

Line chart 2003–2021 shows leasehold flat prices falling from near zero to about 10% below freehold values. — The price gap between apartments on plots whose leases were renewed in 2021 and similar apartments on freehold plots in the same areas. Graph: Falkenbach, Harjunen, Mäkelä & Oikarinen

When knowledge of the several-fold rent increases coming to Helsinki’s old leased plots had spread, apartments on those plots ended up roughly ten percent cheaper – on average about €28 000 – than similar apartments on freehold plots. However, prices did not react immediately when the upcoming increases were announced in 2008; instead, the gap widened gradually as information accumulated. In the end, the difference was in line with the value of future rent payments.

The study was recently published in Real Estate Economics, a leading journal in real estate economics. In addition to Assistant Professori Oskari Harjunen and Associate Professor Heidi Falkenbach from Aalto University, the authors included Assistant Professor Erik Mäkelä of the Turku School of Economics and Professor Elias Oikarinen of the University of Oulu.

Researchers tracked Helsinki apartments in blocks of flats whose land lease contracts were renewed in 2021. The new land rent increased their housing costs by an average of about €1 130 per year. The researchers compared the sale prices of these apartments with similarly aged apartments on freehold plots located in the same areas during 2003–2021.

The apartments were built around the turn of the 1950s and 1960s. Their land rents, indexed to a cost-of-living index, had fallen to only a fraction of the market level by the end of the contract period, because land values in Helsinki rose much faster than inflation. The old rent made up only a small part of the monthly maintenance charge that owners pay to their housing company, and there was no price gap between apartments on leased plots and those on freehold plots until, at the beginning of 2008, the City of Helsinki announced that rents on expiring contracts would be raised closer to market levels upon renewal. Large-scale renewals had not been carried out in Helsinki before that, and the increases had scarcely been discussed publicly, so the announcement brought significant new information to the market.

Man with glasses and moustache in blue shirt leaning on wooden rail against pale wall — Assistant Professor Oskari Harjunen. Image: Jaakko Kahilaniemi / Aalto University

The announcement did not change prices immediately, and the price gap widened only gradually. Starting in 2017, a few years before the new rents took effect, the city sent leaseholders plot-specific estimates of the new rents and published calculations of the increases’ impact on housing costs. After this, in 2017–2021, apartments on leased plots ended up about ten percent cheaper–roughly €28 000 for a mid-priced apartment–than comparable apartments on freehold plots. The difference is in line with the value of the future rent payments.

'Nothing dramatic happened. Instead of prices collapsing, they settled at a level consistent with the forthcoming land lease rents. The market functioned, only slowly. When buyers knew how much the maintenance charge would increase, the rise was also reflected in apartment prices,' Oskari Harjunen says.

Clear communication helps with further increases

For a buyer, assessing the impact of a future land rent is laborious. During the adjustment period, in transactions made at the same time in the same area, some buyers fully priced in the coming increase while others almost ignored it. The share of transactions that accounted for the increase grew as information and experience from earlier renewals accumulated.

Woman in a black blazer seated at a white desk, resting her hands on a magazine in a light office. — Associate Professor Heidi Falkenbach. Image: Adolpho Vera / Aalto University

'The timing and shape of the price effect are the main result of the study. During the adjustment period, however, information was distributed unevenly, and it is possible that some households–for example those with weaker financial literacy–fell behind. Our data do not tell us, however, who ultimately benefited and who lost,' says Heidi Falkenbach.

In Helsinki’s new lease contracts for the plots included in the study, the land rent was calculated on the basis of roughly 60 percent of the plot’s market value and phased in over ten years. More old land lease contracts will expire in the coming years both in Helsinki and elsewhere in the capital region.

'The increases are justified and necessary. Under the old contracts, owners of apartments on leased plots paid land rents for decades that we re only a fraction of the market level. In practice, this amounted to a transfer from the city to them. Even the increased rents remain below the level implied by the land’s market value,' notes Assistant Professor Erik Mäkelä of the Turku School of Economics.

The results matter elsewhere in Finland as well, since many cities have apartments on leased plots.

'It would be important for rent increases to be communicated early, visibly and clearly in euros, for example with calculators that let buyers and sellers see the impact on their own apartment. This would speed up market adjustment and reduce differences in knowledge between households. Otherwise, there is a risk that households with weaker financial literacy suffer significant financial losses,' says Professor of Economics Elias Oikarinen of the University of Oulu.

The study in brief

The study is based on nearly 11 000 housing transactions in Helsinki during 2003–2021 (price data from the Central Federation of Finnish Real Estate Agencies (Kiinteistönvälitysalan Keskusliitto ry)) and land lease contract data from the City of Helsinki. The focus was on condominium apartments built during 1957–1963.
The renewed land lease rents raised housing costs by an average of about €1 130 per year (ranging from €375 to €3 693).
In 2017–2021, apartments on leasehold land were roughly 10.5% cheaper relative to corresponding apartments on freehold land.
Rent increases were not observed to have an effect on the market rents of apartments.
The price difference corresponds to the present value of future land rent payments using a 2.5–3.7% real discount rate, which is consistent with studies conducted in the UK, Singapore and Amsterdam.
The study was funded by the Strategic Research Council at the Research Council of Finland, the Research Council of Finland, the OP Group Research Foundation and Länsi-Suomen Yleishyödyllinen Asuntosäätiö.

Link to the research article: Information Capitalization in the Housing Market: Evidence from Land Leases - Real Estate Economics