The Finnish property market continues to attract both foreign and domestic investors. In 2016, residential properties continued strengthening their position in the property investment market, supported by continuous rental growth and strong investment demand. In the commercial property markets, investment demand expanded also beyond the prime assets and locations.
Transaction volume increased to €7.4 billion in 2016
The transaction volume reached a new record in 2016, boosted by several major portfolio transactions. Domestic funds and investment companies actively increased their portfolios in 2016. The share of foreign investors amounted to some 26% of all transactions. The transactions market was characterised by some major residential property portfolio transactions, and the share of residential properties amounted to 38%. Several foreign investors entered the Finnish residential investment market in 2016. Thanks to active new development as well as continuous capital growth, residential became the biggest sector in the invested property market with a share of some 30%.
The total size of the property investment market increased by 7% in 2016
The total size of the invested property market increased to €58.2 billion at the end of 2016. The growth is mainly a result of newly developed properties in the investors’ portfolios. Domestic institutions remain the biggest player group in the market, although their share has decreased markedly in recent years and currently stands at some 27%. In 2016, institutions continued restructuring their portfolios, and were involved in several major transactions. As a result, the absolute amount of their investments remained unchanged. Domestic funds and both listed and non-listed investment companies increased their portfolios rapidly in 2016. Foreign investors account for some 21% of the total market.
Residential continues to perform strongly, Helsinki CBD offices outperform all other submarkets
Of the main property sectors, residential has shown the strongest performance in the KTI Index for nine consecutive years. In 2016, total return on residential amounted to 8.0%. Smaller investments sectors, hotel and healthcare properties, outperformed residential with total returns of 12.4 and 9.8%, respectively. Yield compression continued to support capital growth of Helsinki CBD offices, where total return ended at 8.2%. In the whole country on average, total return of offices decreased to 4.8%. Returns on offices were pressured by high vacancy rates, which currently stand at some 14% in the Helsinki metropolitan area.
Retail property market in the Helsinki metropolitan area is characterised by active new development with some 165,000 sqm of new retail space under construction, and an additional 200,000 sqm to be started in the near future. Need for new retail space is based on the continuous population growth in the area. New development is mostly concentrated around the station areas of the new rail connections – Ring Rail Line and the western metro line.
- For more information, please contact:
Hanna Kaleva, KTI Finland, +358 40 5555 269, hanna.kaleva@kti.fi
Read more about the structure, players, market practices and conditions in the Finnish property investment market on The Finnish Property Market 2017 -report, published today.
