Dissertation: Which apartment types and regions are most risky in Finland?

Josephine Dufitinema will defend her doctoral dissertation on Friday, September 10, 2021.
An apartment in Helsinki, Pori or Kotka? Investors can be surprised by the geographical location and type of apartments to include in their portfolio to acquire the best possible investment return.

Josephine Dufitinema’s doctoral research at the University of Vaasa, Finland, considers 45 cities and sub-areas and found that over half of them exhibit certain periods of higher house prices variation across three studied apartment types, single-room, two-rooms, and more than three rooms. Densely populated regions such as Helsinki as well as less populated cities such as Kotka were found to demonstrate these higher house prices fluctuations.

This aspect highlights the higher risk of concentrating a housing portfolio in narrow geographic areas such as Helsinki, as many investors do. While diversifying a portfolio across Finland and by apartment type can lower risk, says Dufitinema.

On the other hand, some regions demonstrated more stable house prices behaviour. These include the sub-market (area outside of the city) of Oulu, Lahti and Joensuu-city in all three flats categories and sub-market of Vaasa and Tampere-city in both one-room and two-rooms flats types. One possible interpretation of these constant variations could be that the house prices of these cities and sub-areas might be less active and thereby less volatile.

Residential property – The largest and growing sector in the Finnish property investment market

In the current state of lower interest rates and higher and turbulent stock prices, investors are seeking new targets of which housing markets, and real estate in general, have been of paramount interest lately, says Dufitinema.

In 2020, the residential property investment grew by 9 per cent, and the sector represented 32 per cent of the total property investment market. With 46 per cent of the Finnish population living in blocks of flats, according to the 2018 statistics, this property type has increased its investors’ attractiveness in the Finnish residential properties sector.

According to Dufitinema, regions that are often on the top of the housing investors’ list, Helsinki, Tampere, and Turku, will continue to experience a high house price return growth across all apartment types. This aspect is due to their continuous growth in terms of population and economic development and their very active housing market activities. Other areas projected to see a high house price return growth, especially in small apartments, are Lahti and Kuopio’s sub-market.

In less densely populated regions, Hämeenlinna, Lappeenranta, Pori, Seinäjoki and Kotka, larger flats are predicted to face a decline in house price returns. This observation results from little or even sluggish demand for these apartment types compared to other types. In Finland, urbanisation and a continuous decline in household’s average size drive high demand for small and well-located flats. Therefore, more than three rooms flats category has experienced a significant downturn in their favour, leading to their drop in prices, especially in less populated regions.

The housing sector has been found to act as a leading indicator of the country’s economy. Hence, future house price movements can provide policymakers with insights into the economy’s overall trend, thereby supporting designing improved and more adapted policies, Dufitinema points out.

Dufitinema's dissertation examines whether the Finnish house prices of fifteen main regions display constant or time-varying variances. Depending on whether the variance is constant or time-varying, she establishes a time-series generating process that provides a superior forecast. Dufitinema compares the Autoregressive Moving Average models and AR Fractionally Integrated MA models for regions with constant variances and Generalised AR Conditional Heteroscedasticity type and Stochastic Volatility models for regions with time-varying variances. The thesis also aims to offer an outlook of the Finnish housing markets.

Doctoral dissertation

Dufitinema, Josephine (2021) Financial risk forecasting: A case study of the Finnish housing market. Acta Wasaensia 463.Väitöskirja. Doctoral dissertation. Vaasan yliopisto. University of Vaasa.

Publication pdf: http://urn.fi/URN:ISBN:978-952-476-963-1

Public Defense

The public examination of M.Sc. Josephine Dufitinema’s doctoral dissertation "Financial risk forecasting : A case study of the Finnish housing market" will be held on Friday 10 September 2021 at noon.

The event will be organised online: : https://uwasa.zoom.us/j/67554405990?pwd=UW16ZlRqSkh5UjFmazlmR29XSEZrQT09
Password: 208077

Professor Juho Kanniainen (Tampere University) will act as an opponent and Professor Seppo Pynnönen as custos.


Josephine Dufitinema was born in 1985 in Rwanda. She has a Bachelor’s degree in Applied Mathematics from the University of Rwanda, 2010, and a Master's degree in Computational Engineering from Lappeenranta University of Technology, 2014. Dufitinema lives in Vaasa and works as a university teacher in statics at the University of Vaasa.

Further information

Josephine Dufitinema, tel. +358 46 841 9452, Josephine.dufitinema (@) uwasa.fi

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