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Last Updated: Feb 26, 2017




The Finnish housing market is stable, but transaction volumes are heating up, as is construction activity.

During the last quarter of 2016, the average price of old dwellings rose by 1.2% y-o-y (0.5% inflation-adjusted) to around €2,295 (US$ 2,454) per sq. m., according to Statistics Finland.
  • The average price of old dwellings in Greater Helsinki increased by 2.8% to €3,664 (US$ 3,918) per sq. m. during the year to Q4 2016. The average price of blocks of flats rose 3% to €3,863 (US$ 4,130) per sq. m. The average price of terraced houses rose 2.4% to €3,304 (US$ 3,533) per sq. m.
  • In the rest of the country, the average price of old dwellings fell by 0.4% y-o-y to €1,681 (US$ 1,797) in Q4 2016. Blocks of flats had an average price of €1,685 (US$ 1,802) per sq. m., slightly up by 0.2% y-o-y. Terraced houses, on the other hand, had a price drop of 0.9% y-o-y to an average price of €1,678 (US$ 1,794) per sq. m.

New dwelling prices, in general, were up by 1.6% (0.9% inflation-adjusted) to €3,609 (US$ 3,859) per sq. m. New dwelling prices in Helsinki fell by 3.9% (-4.6% inflation-adjusted). In the rest of the country, average prices rose by 4.6% (3.9% inflation-adjusted) to €3,228 (US$ 3,451) per sq. m.

Housing starts were up at around 5,129 units, higher than in the previous decade, with an average of 4,500 new housing units being completed annually since 2012, according to the City of Helsinki.

Danske Bank expects housing construction to remain strong in 2017, although they expect that growth figures are "set to peak already", with continued construction of apartments cooling rents and house prices.

House prices are expected to "creep up" in the capital region, according to Juhana Brotherus, chief economist of the Mortgage Society of Finland (Hypo), in an interview with Uusi Suomi. However, increased construction will rein in prices in Helsinki. “It is reassuring that an unprecedented construction boom is under-way in Helsinki, which has kept the prices in check. With the supply growing, the prices won't get totally out of hand,” said Brotherus.

Finland house prices In 2000 the government removed the requirement that a nonresident must obtain a permit to buy a secondary residential property in Finland, putting foreigners on exactly the same footing as Finns. However, foreigners are restricted from acquiring property in the Province of Aland (Ahvenanmaa), an archipelago. Foreigners need to ask permission from the Finns to purchase property in this archipelago.

Analysis of Finland Residential Property Market »


RENTAL YIELDS
Last Updated: Aug 05, 2016



Rental property gives very moderate returns in Helsinki. Gross rental yields range from 2.86% to 4.11%. Smaller apartments earn the highest rental returns, while bigger apartments earn the lowest rental returns.

Prices of 60 sq. m. apartments are now EUR 6,700 per sq. m.,.

Rents range from EUR 17.3 to EUR 23 per sq. m. per month. This is close to our findings two years ago, when we found rents ranging from EUR 20 to EUR 25 per sq. m. per month.

Round trip transaction costs are moderate in Finland.  See our Property transaction costs analysis in Finland and Residential property transaction costs in Finland, compared to the rest of Europe.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: May 08, 2017



Rental Income: Rental income is considered as income from capital and is taxed at progressive rates, from 30% to 34%. Income-generating expenses are deductible from the gross rental income.

Capital Gains: Capital gains are considered as income from capital and are taxed at progressive rates, from 30% to 34%.

Inheritance: Inheritance tax is imposed at progressive rates of 8%, 11% and 14% on the inheritance of the spouse, lineal descendants, and lineal ascendants.

Residents: Residents are taxed on their worldwide income. Capital income is taxed at progressive rates, from 30% to 34%. Earned income is taxed at progressive rates, from 66.25% to 31.50%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: May 09, 2017



Roundtrip transaction costs are around 7.77% to 10.25% of the property’s price. Real property transfer tax of 4%, usually paid by the buyer, is sometimes included in the selling price especially if the transaction involves an agent. It takes about 32 days to complete the three procedures needed to register a property.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: May 30, 2006



Finland finnish wooden housesFinland law and practice is neutral between landlord and tenants.

Rent: Tenancies are generally unregulated. Landlord and tenant may freely negotiate rents, but the courts may reduce the existing rent if it significantly exceeds the current average market rate charged on comparable apartments in the area.

Tenant Security: The landlord must give a termination notice of at least six months if the tenancy has continuously existed for more than a year, and a three-month notice is mandatory for leases existing for less than a year.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Feb 26, 2017


Domestic demand drives Finland's economy in 2016, expansion to continue in 2017

Finland gdp growth and inflation rateAfter a three-year recession and meagre growth during the last four years, in the third quarter of 2016, the Finnish economy expanded by 1.6% y-o-y (0.4% q-o-q), following 0.9% y-o-y growth in Q2 and robust 2.1% y-o-y growth in Q1 2016, according to Statistics Finland.

The recovery was driven by the domestic demand, with private consumption expanding by 2.1% y-o-y and government consumption by 0.7% y-o-y.

The Finnish economy is expected to have grown by 1% in 2016, thanks to the positive economic trends in the first three quarters, as well as the continued support of domestic demand. It is predicted to expand further by 1.3% in 2017, according to the Bank of Finland.

The eurozone debt crisis dragged Finland's economy back to recession in 2012, three years after an 8.3% contraction during the 2009 global financial crisis. The economy shrunk by 1.5% in 2012, and the contractions continued in 2013 and 2014, declining by 0.8% and 0.7%, respectively.

In 2015, the economy, although freed from recession, barely grew at 0.2%. During the same year, Finland was named the weakest economy in the euro zone, which prompted the country's finance minister to label it "the new sick man of Europe".

At the heart of this has been the rise of the Smartphone and the inability of Nokia to compete.  Between 1998 and 2007, Nokia was responsible for 20% of all of Finland's exports, and in 2000 Nokia alone accounted for 4% of the country's entire GDP. But by 2008-9 the writing was on the wall, and the February 2011 partnership with Windows failed to save the company; by mid-2012 Nokia was almost bankrupt, and its contribution to Finnish GDP was actually negative.  In April 2014 Nokia sold its mobile phone business to Microsoft.  Nokia's decline (though it is still the second largest mobile company in the world by sales volumes, but its business is low-end and profitability is low) left over 40,000 highly-skilled Finnish ICT workers unemployed.

In 2016, Finland's employment rate rose to 68.7% from 68.1% in 2015. Unemployment fell to 7.9% in December 2016 from last year's 9.2%.

However, while there are new jobs in construction, trade, and services, the manufacturing sector still has low levels of employment due to the continued weak performance of exports.

Aside from Nokia's weakened activity in the recent years, the country's exports was also plagued by the economic recession in Russia ― Finland's major trading partner, as well as the country's stiff labor market and high labour costs.

In June 2016, a Competitiveness Pact was signed to ensure a boost in exports. This pact was aimed at improving price competitiveness and ultimately improve exports through the reduction of labour costs. The agreement includes the following conditions, which mostly are effective in 2017:
  • A wage freeze for one year;
  • An increase of 24 hours in the annual working time (still without raising wages);
  • A higher share of social security payments to employees; and
  • A reduction of holiday bonuses in the public sector.

Finland real estate and propertiesThe government pledged income tax concessions for participating employers, which was included in the 2017 budget, worth approximately around €315 million (US$ 335 million) to €515 million (US$ 547 million), depending on the agreement's coverage.

While this pact promises export gains, its positive impact is likely only to be long-term. Moreover, the wage freeze is expected to adversely affect consumption this year.

Aside from the recent recession, the country's rising debt has brought government finances under pressure. In October 2014, Standard & Poor's (S&P) cut Finland's credit rating to 'AA+' from AAA.

In March 2016, Fitch followed the rate cut, downgrading Finland's credit rating to Aa+ with a stable outlook.

Finland's debt-to-GDP ratio was around 63.6% in 2015, above the 60% of GDP ceiling imposed by EU. The debt-to-GDP ratio is expected to have risen further to 65.6% in 2016, according to Statistics Finland. The country had a budget deficit of 2.8% in 2015.

The country's inflation rate in 2016 was around 0.4%, up from -0.2% last year.







  • Low to moderate transaction costs
  • Strong and stable economy
  • Tenant-neutral rental market
  • Moderate yields in Helsinki
  • High rental income tax
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €6,609 For a 120 sq. m. property, usually an apartment.
Rental Yield: 4.11% For a 120 sq. m. property, usually an apartment.
Rent/month: €2,718 For a 120 sq. m. property.
Income Tax: 22.50% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 6.99% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 34.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice.

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