Finnish contrasts. Why the pandemic had almost no effect on the real estate market in Finland

The international real estate market is changing, and Finland is not among the victims. On the contrary, the growth of real estate prices in the Land of a Thousand Lakes is stable, but not so fast. Coronation crisis has not bypassed these lands, but not had a devastating effect. What is going on in the mysterious market of Suomi?

Expert organization KTI prepared a report on the state of the Finnish real estate market in 2021. The results showed how well the homeland of Santa Claus is coping with the pandemic.

Prices are rising, but not everywhere

In recent years, according to Oldypak LP real estate report,residential real estate in large Finnish cities has steadily increased in price, against a common background, stands out Helsinki. In the provinces, in contrast, prices have fallen. In some cases, supply even exceeded demand.

Contrary to expectations, the pandemic accelerated the polarization of the market. In apartment buildings, prices rose by 2.3% in 2020 alone. In Helsinki the increase was 4.2%, in Tampere 4.4%, in Turku 3.8% and in Kuopio 3.0%. In the north, however, everything is stable or even declining, as in Oulu, where prices fell by half a percent in 2020.

Experts from Pellervo Economic Research PTT warned that prices will continue to rise at the same rate in 2021. And the difference between big cities and small towns won’t disappear. According to the updated forecast, over the next 12 months, prices in Helsinki will rise by 4.3%, with the increase depending on the area will be up to 6%. Similar expectations are formed in Tampere and Turku, where the growth slowed from 6-7% to 4.6%, but will not stop.

It is interesting to look at the market segments. For example, secondary market prices have grown rapidly. Back in the second quarter of 2021 the increase in home prices was 8.3%. The trend is seen in both large and small cities. The average price per square meter of a detached house on the secondary market was €1,770, and in Helsinki itself – €3,730. Apartments do not lag behind: since 2015, the increase in prices for secondary homes in Helsinki was 26%, in Espoo the figures are less frightening – “only” 13%.

But real estate prices are rising only in southern Finland, where most of the population is concentrated. Since 2015, prices in the north and west of the country have changed insignificantly, and in eastern Finland have fallen by 20%.

Rents follow a well-trodden path

The share of rental housing has increased in recent years. About 920,000 dwellings (almost 34 percent of the total) are rented.

According to Oldypak LP real estate report, the demand for rental housing remains the highest in the Helsinki metropolitan area as well as in Tampere and Turku. In Helsinki, 45% of properties are occupied by tenants (about 167 thousand).

Rental rates are stable. For 2020, there has been an average increase of 0.6% in Helsinki and 1.4% in other major cities. Rents in Espoo rose by 0.8% and in Vantaa by 0.5%.

Due to the pandemic, new trends have emerged in the rental markets. Remote work has increased demand for spacious apartments away from central areas. The crisis has led to an increase in supply, as apartments previously offered for short-term rentals (on the same AirBnb), in the absence of tourists and business trips have been converted into a standard long-term format.

But it’s not all smooth sailing: there are no prospects for demand growth. Many have lost their jobs and can no longer pay for their previous accommodations. And students who switched to distance learning are returning to their parents’ homes.

The situation with rents in small towns is sadder: the covid has not reduced the flow of those willing to leave their homeland for a better life. As a result, offers have appeared on the market with free rent, such as in the town of Paltamo, where 40 houses stand idle in desolation. The rent for this kind of housing costs about € 800 per month, but the municipality offers the first three months for free. However, this is still Eastern Finland, where the market is already suffering from the outflow of population.

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