The Finnish property market Finding balance

The growth of the Finnish economy started to slow down at the end of 2022. The Bank of Finland predicts that Finland's economic growth will slow to -0.5% in 2023. However, a strong start to 2022, post-pandemic austerity, and the employment situation will provide a foundation for resilience during the upcoming recession. The weak economic growth will slightly reduce labor demand in 2023, but the labor market still has a high number of job vacancies, cushioning the impact.

Inflation is expected to reach 5% in 2023, according to the Bank of Finland. Inflation is expected to decrease from current levels as economic growth slows in the short term. This slowdown will be caused by lower fuel and goods prices and a slowing aggregate demand. Inflation in Finland is lower than the Euro zone average.

The European Central Bank has raised the policy rate rapidly and in H2 2022 they raised rates by 2.5 percentage points. The ECB expects further rate hikes but at a slower pace. The ECB is not easing monetary policy quickly as it predicts inflation will remain above its 2% target for years to come. Market sentiment does not support high interest rates in the medium term, and interest rates are expected to reach their peak in the summer.

The Finnish real estate market had a record-breaking H1 2022, with transactions totaling 4.3 billion euros. There were 10 mega-deals worth over 100 million euros, which is more than any single year prior. In total, there were 14 mega-deals in 2022. The real estate transaction market shifted towards the end of the year, and the total transaction volume for 2022 was 7.0 billion euros. Q4 2022 saw 1.1 billion euros worth of deals, the lowest since 2012. A weak H1 2023 would be relatively unsurprising.

Contact:

Valtteri Vuorio valtteri.vuorio@newsec.fi