Finland's property transfer tax has become a central battleground for coalition infighting and opposition pressure as demands for its temporary removal grow to stimulate the stalled housing market. Government parties, notably the Swedish People's Party (RKP) and the Christian Democrats (KD), are now echoing calls long made by the opposition to scrap the levy, creating a rare point of political convergence aimed at boosting construction and economic growth. This push for a temporary tax holiday, however, collides with the government's broader fiscal strategy and tight budget constraints, setting the stage for a critical debate within the ruling coalition. The move highlights the mounting political pressure to address a slumping real estate sector, which has seen transaction volumes plummet and construction projects stall across the country.
Coalition Partners Break Ranks on Tax Policy
Internal pressure is building within Prime Minister Petteri Orpo's coalition as key partner parties publicly advocate for policies diverging from the government's agreed program. RKP's parliamentary group chair, Otto Andersson, issued a statement on Monday calling for a temporary, one-year removal of the property transfer tax. "A temporary, for example one-year, removal of the property transfer tax would accelerate the housing market and at the same time promote the struggling construction sector," Andersson stated. He argued this would create jobs and aid economic growth. His party colleague, MP Henrik Wickström, also supports a one-year abolition or, alternatively, halving the current rate. Wickström further wants to reverse the government's 2023 decision to eliminate the first-time home buyer exemption, a move made when the general tax rate was lowered from 4% to 3%. This positions the RKP in direct contention with the government's recent fiscal history.
Opposition Finds Unlikely Allies in Government
The Christian Democrats have joined the chorus, with their parliamentary group chair, Peter Ă–stman, raising the issue at the party's winter conference. "The role of the transfer tax should be re-evaluated, as in the current market situation it forms a significant additional obstacle to the initiation of housing transactions, especially outside growth centres," Ă–stman said last Wednesday. This internal government debate validates long-standing opposition proposals. Centre Party chair Antti Kaikkonen has previously advocated for a full six-month exemption from the tax. The Social Democratic Party, led by Antti Lindtman, has targeted relief specifically at first-time buyers, proposing a one-year exemption for this group and a five-year reinstatement of the mortgage interest deduction for new homeowners. The convergence of these proposals from across the political spectrum underscores the perceived severity of the housing market's stagnation and its broad economic implications.
The Mechanics of a Market Intervention
The property transfer tax, levied on the sale of apartments and properties, acts as a direct transaction cost that can deter mobility and market fluidity. Proponents of its temporary removal argue it would provide an immediate stimulus by lowering the upfront cost of purchasing a home, thereby encouraging transactions and increasing liquidity in the frozen market. This, in turn, would support the construction industry, which faces a severe downturn with falling orders and rising unemployment. The debate is not merely about stimulus but also about regional fairness, as MPs like Ă–stman note the tax's disproportionate dampening effect on markets outside major urban centers like Helsinki, Tampere, and Turku. The tax's role is now being scrutinized not just as a revenue stream but as a potential barrier to economic recovery, with its suspension framed as a surgical tool to unlock market activity.
The Government's Fiscal Dilemma
Despite the growing clamor, the Finnish government faces a significant hurdle in implementing such a measure: cost. Abolishing the property transfer tax, even temporarily, would create a substantial hole in state revenues at a time when the coalition is committed to fiscal consolidation and reducing the debt-to-GDP ratio. The Ministry of Finance would need to model the foregone revenue against potential indirect gains from increased economic activity and higher tax receipts from related sectors like construction and retail. Furthermore, any move to reinstate benefits for first-time buyers, as suggested by Wickström and Lindtman, would add complexity and cost. The debate forces the government to weigh short-term economic stimulus against its medium-term fiscal targets, a classic policy dilemma that has split the coalition. The National Coalition Party and the Finns Party, as the senior partners, must now navigate these competing demands within their own budget framework.
A Test of Coalition Cohesion
The growing calls for the tax's removal present the first major test of the government's ability to adapt its economic policy to changing circumstances. Will the coalition hold firm to its original fiscal plan, or will it bend to pressure from its own junior partners and the opposition to provide targeted stimulus? The outcome will signal the government's flexibility and its priority between deficit reduction and active market intervention. The coming weeks will likely see intense negotiations between the finance ministry and the parliamentary groups of the RKP and KD. Their ability to sway the government's direction remains uncertain, but their public campaigning has undoubtedly moved the issue to the top of the political agenda. The decision, when it comes, will reveal much about the balance of power within the ruling coalition and its economic policy in an election cycle.