Buying real estate in Finland?

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Is it a good time to buy a property in Finland in 2024?

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Everything you need to know is included in our Finland Property Pack

Are you thinking of investing in property in the land of a Thousand Lakes? Are you wondering whether now is the right time to make a move?

Different people see market timing differently. The Finnish real estate agent you consulted might advise you to buy property now, whereas your relative who actually resides in Helsinki may suggest waiting for more favorable market conditions.

At Investropa, when we create articles or update our pack of documents related to the real estate market in Finland, we prioritize facts and data over opinions and rumors.

After thoroughly analyzing official reports and statistics available on government websites, we have gathered solid information in a database. Here are our findings that can assist you in determining whether it's the right time to invest in real estate in Finland.

We hope you find this article insightful!

How is the property market in Finland now?

Finland is, today, an extremely stable country

Positive

Stability is crucial when buying a property in a country as it ensures security, safeguards investments, and fosters a favorable environment for growth and well-being. It is an information you need as a foreigner looking to buy real estate in Finland.

You most likely already know that Finland is widely known for its exceptional stability. The last Fragile State Index reported for this country is 15.1, which one of the highest values in the world.

Finland has a strong and well-functioning democracy, which has enabled the country to develop economically, socially and politically. Additionally, Finland has a strong commitment to social justice, which has helped to reduce inequality and promote stability.

Now, let's shift our focus to the economic forecast.

Finland will keep growing

Positive

Before investing in properties, check if the country's economy is strong enough.

As projected by the IMF, Finland is likely to finish 2023 with a growth rate of 0.1%, which is a bit disappointing. As for 2024, the consensus estimate is 1.3%.

However, this low number is just for the short-term, as Finland's economy is expected to increase by 5% during the next 5 years, resulting in an average GDP growth rate of 1%.

The moderate growth rate in Finland provides a stable environment for investors, as it indicates that property values will not be subject to sudden, drastic changes. Additionally, the moderate growth rate gives investors more time to research and consider their options before investing in a property.

In addition, there are other metrics to consider.Finland gdp growth

Finnish business owners have become pessimistic about the economy

Negative

GDP growth is great, but it may not capture all the expectations of businesses in property market. Fortunately, in Finland there exists an official metric that is consistently published. It's not the case for every country, so we're lucky.

The Business Consumer Index (BCI) is a metric that assesses business leaders' confidence in the current and future economic conditions, relying on surveys and assessments.

The Confederation of Finnish Industries (EK) reports that the Business Confidence Index has reached a value of -5 for Finland. A negative BCI score typically indicates a pessimistic outlook.

Things were different 12 months ago. Business owners were actually rather optimistic and the BCI was at 9.

A lack of confidence among local businesses in Finland can result in a sluggish property market, with reduced investment and slower property price growth. Buyers might face limited options in terms of available properties and potentially encounter challenges in finding motivated sellers or suitable financing options.

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Finland is delivering less building permits

Negative

If you're thinking of investing in property in a country, it's worth considering the number of permits issued for development projects. When more building permits are issued, it shows that people have a positive view of the property market and see it as a good investment.

Unfortunately, the number of building permits delivered is decreasing in Finland.

Over the course of the past year, according to Statistics Finland, the number of building permits granted by Finnish local institutions fell by 27.7%, from 37,463 to 27,097 units.

This is definitely a negative signal. Let's look at more data.

One last important point to consider is that fewer building permits result in a reduced supply of properties. If this is the case, it is likely that housing prices will increase in Finland in 2024.

Property prices in Finland, once slowly growing, are now declining

Neutral

Finland's home prices have increased by 6.3% in 5 years according to eurostat.

It means that if you had bought a lakeside cottage in Lapland for $500,000 five years ago, then it would now be worth around $532,000.

Property prices have recently started to decrease following a period of calm and slow growth.

How should we interpret this? Does it indicate that it's a favorable time to purchase property in Finland? While some may perceive it as the start of a downward trend, the most optimistic among us may view it as a market correction, presenting an opportunity to invest in the Finnish property market.

You can find a more detailed analysis of the real estate prices in our property pack for Finland.Finland housing prices real estate

Everything you need to know is included in our Finland Property Pack

Finland's population is getting (a bit) richer

Positive

When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:

  • a growing population means more people needing homes
  • a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Finland, the average GDP per capita has changed by 3.2% over the last 5 years. Despite being minimal, there is still some observable growth.

This means that, if you purchase a cozy log cabin in Lapland and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.

If you're considering purchasing and renting it out, this trend is a good thing. Then, the rental demand might increase in cities like Helsinki, Espoo or Tampere in 2024.

No high rental yields in Finland

Neutral

Rental yield is a common measure in real estate investing.

It gives you an idea of the rental income percentage you can obtain from a property you want to buy.

Based on the data provided by Numbeo, rental properties in Finland promise gross rental yields from 1.7% and 4.4%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Finland.

It indicates a moderate level of income generation.

As we mentioned before, the amount of available real estate will stay the same (and housing prices may be stable), but more wealthy people will be looking to rent properties. Then we can conclude that rental yields might increase in Finland in 2024.

Finland rental yields

Everything you need to know is included in our Finland Property Pack

In Finland, expect moderate inflationary effect

Neutral

In two words, inflation is when money loses worth.

It's when your usual sauna session in Helsinki costs 25 euros instead of 20 euros a couple of years ago.

If you're considering investing in a property, high inflation can offer you several advantages:

  • Property values have a tendency to increase over time, leading to potential capital appreciation.
  • Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
  • Inflation reduces the real value of debt, making mortgage payments more affordable.
  • Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
  • Diversifying your portfolio with real estate provides stability during periods of inflation.
  • Tax advantages, such as depreciation deductions, can help offset the impact of inflation.

As projected by the IMF, over the next 5 years, Finland will have an inflation rate of 13.5%, which gives us an average yearly increase of 2.7%.

This data infers that Finland could face inflation in the near future, which would lead to an increase in prices. Consequently, purchasing a property could become more expensive. However, if you buy now, there is a chance that your investment will appreciate, allowing you to sell it at a higher value in the future.

Is it a good time to buy real estate in Finland then?

Now it's time to draw our conclusions.

2024 might not offer the most favorable conditions for property investment in Finland, as a mix of unfavorable signals outweigh the positive ones. Despite Finland's exceptional stability and projected growth, certain aspects warrant caution. The declining property prices, once on a slow growth trajectory, raise concerns about potential investment returns and market stability.

Moreover, the lack of high rental yields dampens the attractiveness of property investments in Finland. While the country's population is becoming wealthier, these neutral aspects, combined with the anticipation of moderate inflation, contribute to a more cautious investment outlook.

More significantly, the pessimism expressed by Finnish business owners regarding the economy presents a noteworthy concern. This sentiment could have repercussions on economic activities, job security, and the overall investment environment, potentially impacting the property market negatively.

Furthermore, the decrease in building permits being delivered signals a potential contraction in new property developments. This scarcity in supply could lead to stagnation in the market and even inflated property prices, making it a less opportune time for potential buyers to enter the market in 2024.

In conclusion, while Finland's stability and growth prospects are positive attributes, the combination of declining property prices, weak rental yields, pessimistic business sentiments, and reduced building permits suggests that 2024 might not be the optimal year for property investment in Finland. Potential investors should carefully assess these indicators before making investment decisions.

We sincerely hope this article has been helpful!. If you need to know more, you can check our our pack of documents related to the real estate market in Finland.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

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