On June 6, 2024, the real estate market in Finland is experiencing a period of low transaction volumes, but there are expectations for an increase in the near future. The demand in the construction and real estate sector is anticipated to improve towards the end of 2024. Despite a decrease in construction activity in Finland, there is a projected turnaround towards growth by the end of 2024. The rise in construction costs has halted, and material costs are on a downward trend.
The economic growth in Finland is expected to begin in the latter part of 2024, with interest rate cuts set to commence. According to the latest economic growth forecasts for Finland, the GDP is predicted to contract by just under half a percent in 2024. However, there is a significant level of uncertainty surrounding these projections, with estimates ranging between zero and -1 percent. The economy is expected to rebound in the fall of 2024, with a forecasted growth of approximately 1.5–2 percent for the following year. The turnaround in Finland’s growth is attributed to a positive shift in the global economy in the spring of 2024. The key export markets for Finland are expected to pick up towards the end of the year, supporting growth, especially in the following year. Additionally, the European Central Bank is expected to initiate interest rate cuts in June, which will bolster growth in several sectors, including construction and real estate.
The real estate market in 2024 has started off quietly, with transaction volumes remaining low. According to KTI’s statistics, the transaction volume from January to April was only around 560 million euros, lower than the previous year. The divergent price expectations between potential buyers and sellers have hindered an increase in transaction volumes.
In April, the Rakli-KTI Real Estate Barometer indicated a slight decrease in net yield requirements for residential and commercial properties in Helsinki’s city center compared to the previous autumn. However, the net yield requirement for prime office space in Helsinki’s city center continued to rise, reaching 5.1 percent in the barometer. Despite this, most respondents in major cities anticipate an increase in both domestic and foreign investor demand over the next 12 months.
The rental rates for office space in Helsinki’s city center have increased by 4.2 percent, with vacancy rates on the rise due to economic conditions and tenant space optimization. The office vacancy rate in the Helsinki metropolitan area was 14.5 percent as of the end of March, approximately two percentage points higher than the previous spring.
Expectations for rental developments are mostly stable or slightly decreasing, with industrial property rents expected to continue rising in major cities. The increased supply of rental apartments has kept rental developments moderate, especially in the Helsinki metropolitan area.
Construction activity in Finland is still on the decline, but a turnaround towards growth is expected by the end of 2024. The volume of construction is projected to decrease by 5–6 percent this year, both nationwide and in the Helsinki metropolitan area. However, consumer purchasing power is expected to improve due to slower inflation and positive wage growth. Nevertheless, consumers may remain cautious due to the deteriorating employment situation, which could slow down the recovery of consumer confidence.
The number of new housing starts in the Helsinki metropolitan area has increased, driven by ARA projects. The volume of commercial construction is also expected to support growth in 2024, with several large projects in the pipeline. The outlook for renovation construction is relatively stable, with a potential increase in activity in the fall.
In conclusion, the real estate and construction markets in Finland are poised for a potential upturn in the latter part of 2024. With various factors influencing the market dynamics, including interest rate cuts and improved economic conditions, there are positive signs for growth and development in the sector. As the year progresses, it will be interesting to see how these trends unfold and impact the overall market landscape.