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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 14.3, which one of the highest values in the world.
Finland's stability is largely attributed to its robust welfare state and comprehensive education system, which ensure high levels of social equity and economic opportunity for its citizens. Additionally, its strong democratic institutions and commitment to transparency and anti-corruption measures foster trust in governance and societal cohesion.
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 2024 with a growth rate of 0.4%, which is a bit disappointing. Regarding 2025, the consensus estimate is 1.9%.
However, this low number is just for the short-term, as Finland's economy is expected to increase by 7% during the next 5 years, resulting in an average GDP growth rate of 1.4%.
A moderate growth rate in Finland suggests a stable and predictable property market, reducing the risk of sudden price drops and making it a safer investment. Additionally, steady growth can lead to consistent returns over time, making it an attractive option for long-term investors.
In addition, there are other metrics to consider.
Finnish business owners don't have faith in 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 -9 for Finland. A negative BCI score typically indicates a pessimistic outlook.
This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -16.
The negative Business Confidence Index in Finland indicates a lack of confidence among local businesses, which can lead to a sluggish property market. This situation may result in reduced investment and slower property price growth. Buyers could face limited options in terms of available properties and might encounter difficulties in finding motivated sellers or securing suitable financing options.
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 2025.
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.
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 2025.
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 2025.
Everything you need to know is included in our Finland Property Pack
In Finland, expect minimal 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 1.0%, which gives us an average yearly increase of 0.2%.
This data infers that Finland is anticipated to experience negligible inflation. Unfortunately, in the absence of inflation, purchasing a property now may not result in substantial price increases or substantial profits in the future.
Is it a good time to buy real estate in Finland then?
Now it's time to draw our conclusions.
While Finland is known for its stability, 2025 might not be the ideal time to buy property there. The country's economy is projected to grow by 7% over the next five years, which translates to an average GDP growth rate of 1.4%. This moderate growth rate suggests a stable and predictable property market, which is generally good for reducing the risk of sudden price drops. However, it also means that the market might not offer the kind of rapid appreciation that some investors look for, making it less appealing for those hoping for quick returns.
Another factor to consider is the decline in building permits being issued in Finland. This reduction in new construction could lead to a tighter housing supply, which might seem like it would drive prices up. However, if the demand doesn't increase at the same pace, it could also mean that the market becomes stagnant, with fewer options for buyers and potentially less competitive pricing.
Currently, property prices in Finland are on a downward trend, which might seem like a good opportunity to buy. However, this decline could indicate underlying issues in the market that might not resolve quickly. While the population is getting slightly richer, this doesn't necessarily translate to a booming property market, especially if the overall economic growth remains moderate.
Lastly, rental yields in Finland, as reported by Numbeo, range from 1.7% to 4.4%. These figures suggest that rental income might not be particularly lucrative, especially when compared to other investment opportunities. Coupled with minimal inflationary effects, the potential for significant profit from property investment in Finland might be limited, making 2025 a less than ideal time to buy.
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.
-Will real estate prices go up 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.