What makes residents prefer housing investment in a highly uncertain market? Perspectives from a survey in shrinking Finnish towns

Urban shrinkage is one of the more critical challenges of contemporary urban societies, and its negative impacts reflect into real estate market dynamics. Despite housing investment typically being the most significant investment of households, rather little is known about the investment rationale in shrinking cities where capital appreciation is considered uncertain. Using survey responses ( n = 313) from eight municipalities in Finland and employing nonparametric tests, we investigated how the residents of shrinking cities perceive future housing market development and the performance of their own housing investments as well as how those perceptions are associated with the respondents’ socio-demographic status, place attachment, futures thinking, and investor characteristics. According to the results, housing investors in shrinking cities are well aware of the current and future challenges related to the local real estate market and to their own investments; ownership status is linked to a more critical evaluation of the real estate market factors in the municipality, whereas low educational level is linked to a less critical evaluation. Despite this, a remarkable share of the owner-occupier respondents continue to prefer owner-occupancy over renting. Only half the owner-occupiers expressed that the value development of their dwelling is important to them. Thus, our results demonstrate that financial aspects do not appear to be major driving factors for ownership in these municipalities. Our findings are beneficial for land use planners and real estate developers foreseeing future housing needs in shrinking cities and for policymakers interested in household and national wealth. • Residents in shrinking cities are aware of the uncertain real estate market. • Financial motivations are not a major driver for housing investment in these areas. • Ownership status is linked to a more critical evaluation of the real estate market factors. • Lower education levels are linked to less critical views of market challenges. • Despite uncertainties, many prefer homeownership over renting in shrinking cities.