University of Oulu

Financial costs and benefits of tenure choice in the Finnish housing market for potential first-time homeowners

Saved in:
Author: Nurmi, Otto1
Organizations: 1University of Oulu, Oulu Business School, Department of Finance, Finance
Format: ebook
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 1.7 MB)
Pages: 95
Persistent link:
Language: English
Published: Oulu : O. Nurmi, 2023
Publish Date: 2023-06-13
Thesis type: Master's thesis
Tutor: Oikarinen, Elias
Reviewer: Oikarinen, Elias
Sahlström, Petri


Housing is a basic necessity that households are generally required to acquire through the housing market. The common tenure choice is between homeownership and renting. Acquiring tenancy with a house purchase is considered the preferred choice as it serves a dual-purpose as a housing consumption good and a household portfolio capital asset, in addition to its other non-financial benefits. In Finland, homeownership is also legislatively preferred as there are tax benefits and governmental guarantees for first-time house purchase. This thesis aims to study the financial effects of tenure choice between renting and homeownership in Finland by first conducting a literature review on the relevant academic fields and then comparing the wealth effects between either a first-time house purchase or renting tenancy and investing in the stock market separately. This is done with a wealth progression series in the time frame 2001–2020 with the estimated average total housing costs and profits for both tenure choices. The estimation is done with the goal of testing how does the theoretical findings of the academic literature apply to an empirical exercise in a random time frame.

Looking at the results, withing the scenarios created, the homeowner acquired significantly larger household wealth through the 20-year time frame. The housing profits are greater as mortgage allows a leveraged position, where the owner’s portfolio return outperform renter’s stock portfolio return due to the scale of the investment. The difference between the periodical housing costs increases over time and generally renting is less expensive at the beginning, which causes a break-even point at some point of the tenancy. Important factors in favor of homeownership were the mortgage terms, governmental benefits in taxation and loan terms, interest rates and the duration. As I assumed similar consumption and income levels, the difference in housing cost was then balanced in the renter’s stock portfolio. While it starts with a positive cash flow into the portfolio, increasing the equity capital, after renter costs exceed owner costs, withdraws have to be made from the portfolio.

When comparing the empirical exercise’s results to the academic literature, common ground can be found. Homeownership is usually assumed to be the better option in the long-term, but for shorter tenures, renting can produce higher utility. Should governments remain to favor homeownership in the western world, continued research into its effect on income equality and stock market participation is important.

see all

Copyright information: © Otto Nurmi, 2023. Except otherwise noted, the reuse of this document is authorised under a Creative Commons Attribution 4.0 International (CC-BY 4.0) licence ( This means that reuse is allowed provided appropriate credit is given and any changes are indicated. For any use or reproduction of elements that are not owned by the author(s), permission may need to be directly from the respective right holders.