4 minute read
The Finnish Property Market
Record high volumes in the first half of 2022
The year 2022 started with strong growth forecasts for the economy, as well as for the real estate transaction market, as economies were opening after the pandemic lockdowns. Due to the supply shock caused by the pandemic, inflation has accelerated. This intensified with the war in Ukraine. During the spring and summer of 2022, the fear of a recession has grown stronger, and the European Central Bank (ECB) was expected to fight inflation by tightening monetary policy by raising interest rates. In July, the ECB raised its key interest rate by 0.5 %. The Finnish economy is projected to grow by 1.7% in 2022. However, the pandemic and the war in Ukraine as well as the Chinese economy play on the uncertainty factor both globally and in Finland. Likewise, inflation might climb higher than current forecasts, and the increase in interest rates might also occur faster than expected affecting the economic outlook. Still, Finland’s economic situation is good for the time being and the economy might perform better than expected. The unemployment rate is expected to decrease further – Russia accounts for less of Finland’s exports than previously, and there exist savings which were built up during the pandemic. For the time being, inflation is expected to slow from current highs and the market sentiment does not support high interest rates in the long run.
Despite the war in Ukraine and inflation and interest rate hike pressures, the real estate market in the first half of 2022 performed exceptionally well. The first half of the year turned out to be best first half of any year so far in terms of transaction volume. In H1 2022, the real estate transaction volume was 4.3 billion euros, 1.5 times more compared to the first half of 2021. The first half of the year saw an estimated 10 megadeals worth more than 100 million euros. This is more than in any one whole year before.
Contact:
Valtteri Vuorio valtteri.vuorio@newsec.fi
Interesting trends on the Finnish property market in 2022
Strong transaction market
The transaction market has continued where it left off at the end of 2021. The transaction activity, which accelerated towards the end of the year, continued in the first quarter, with real estate investments amounting to 2.2 billion euros. The transaction volume of the second quarter was 2.1 billion euros. The rolling 12-month real estate transaction volume rose to more than 8 billion euros in the first quarter for the first time since autumn 2019.
The residential segment continues to make its mark on the transaction market
In the first half of 2022, most deals were made in the residential segment – in total 1.4 billion euros (32% of the total volume). The transaction volume of the residential sector was one of the strongest first halves of any year. The number of international investors continues to grow within the segment. The share of international investors of the transaction volume in the first half of 2022 rose to more than 50 percent. The largest deal was seen in the first quarter when Orange Capital Partners together with GIC acquired a portfolio of 37 properties owned by Morgan Stanley Real Estate, Premico and RIM. In addition, in the second quarter, Heimstaden Bostad bought a portfolio of 64 properties from Sato, and Kojamo bought a portfolio of 13 properties from NREP.
Office strikes back
For the office segment, the transaction volume for the first half of the year also noted an increase compared to last year. In H1 2022, the real estate transaction volume was 570 million euros, an increase of 52% compared to the corresponding time in the previous year. The segment’s transaction volume was 374 million euros in the second quarter. The increase was 59% compared to the second quarter of 2021. Retail finds a new normal
Investments in retail premises in the first half of 2022 amounted to 776 million euros, of which 614 million euros in the first quarter. The biggest transaction was the Stockmann deal, where Keva bought Helsinki’s traditional department store property for 400 million euros from Stockmann in accordance with the corporate restructuring program. A cautious market ahead
The real estate investment market is more cautious in the challenging economic environment and in the market of rising interest rates. Yields are expected to rise slightly from their current levels. However, liquidity and, among other things, the activity of international investors is expected to persist. Long-term structural changes and real estate as an inflation hedge still benefits the asset class.
EUR 7.0 billion
Total investment volume in 2021
EUR 8.5 billion
Total investment volume expected in 2022
+1.7%
GDP growth expected in 2022
