Housing sales Foreign investors are now looking for apartments in Finland, and according to the expert, it can be reflected in rents in a surprising way

Foreign Real estate investors’ investments in Finland have grown to a billion in a few years. The first investments were made in 2015, and the pace is accelerating.

In 2021, professional real estate investors in Finland made real estate transactions worth about seven billion euros. The figure is based on the monitoring of KTI Kiinteistöinformia.

Housing accounted for EUR 2.3 billion of the transactions of professional real estate investors. The amount is the largest in five years.

Last year, foreign investors made housing transactions worth EUR 700 million.

According to the real estate consulting company JLL, foreign investors made housing transactions worth more than one billion euros in Finland last year. The differences between the figures for KTI and JLL are explained by a different statistical method.

The rental housing market is already the largest market for professional real estate investors, larger than, for example, offices, retail properties or factory and logistics premises.

Professional CEO of KTI, which monitors real estate investment activities Hanna Kaleva says that the interest of foreign investors in Finnish rental housing arose even before the corona pandemic.

The entry of international investors into the Finnish housing market began to intensify in 2018.

“More and more capital is coming into the real estate market, and the shift in focus in real estate is above all in the realm of housing investment,” says Kaleva.

Investors have become increasingly interested in owning rental housing over the past decade, even though their net annual income is lower than in other properties.

For example, when different risks are identified in the outlook for offices and shopping centers, home ownership may be a better option for many investors in terms of real estate appreciation.

With zero interest income, professional investors are looking for investment options that are simply “less bad than others”, according to Kaleva.

In this case, a 3–3.5 per cent net return target for housing, combined with a promising housing growth outlook, is an attractive option for many.

Over here Until now, the demand for rental housing has been strong: occupancy rates have been close to 98 per cent, KTI’s Kaleva says.

Now the market is in turmoil.

For example, Vuokraturva said on Thursday that there has been a “huge change” in the Finnish housing market in a year and that renting apartments has become much more difficult than before.

The increase in the value of housing is not enough for shares, among other things.

For example, the S&P500, which tracks large U.S. companies, rose about 27 percent over the past year. At the same time, prices for old block of flats in the Helsinki Metropolitan Area rose by 6.5 per cent between November 2020 and November 2021.

How good investment apartments really are?

According to KTI’s Kaleva, the uniformity of returns speaks in favor of housing investment. Where the valuation of shares can fluctuate sharply, the increase in the value of housing in Finland has been about three per cent a year.

Yields from growth centers have typically been faster.

“Long-term value development is key for these big players. That is the only thing a responsible investor thinks, ”Kaleva reminds.

According to him, the entry of foreign real estate investors into the Finnish market indicates that the Finnish economy is booming – or at least that there is a demand for rent in good properties in large cities.

In Kaleva’s opinion, it is an advantage for tenants that the supply of rental housing will increase.

“The increase in supply is the only medicine for rising rents. It also teaches that the tenant must be taken good care of. ”

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“Even new investors allocate hundreds of millions to Finland, but in some cases more than a billion.”

Real estate consultant JLL’s President and CEO in Finland Tero Lehtonen says that international capital already wants to enter the Finnish real estate market so much that there is no longer enough to buy.

“Even new investors allocate hundreds of millions to Finland, but in some cases even more than a billion,” says Lehtonen about the wishes of JLL’s customers.

JLL estimates that the rental housing stock of foreign real estate investors is already approaching 30,000 homes this year. The value of housing will rise to well over four billion euros.

International Investors in Finland are typically interested in new or relatively new residential buildings in growth centers of different sizes.

Lehtonen says the growing popularity of housing investment is a global phenomenon. There are many reasons: There is a lot of investment in the market due to the support of central banks. Shares are expensive. The safest bond investments, on the other hand, have to pay to keep their assets in these bonds.

For these reasons, the rental housing market, which also provides relatively good inflation protection, is an interesting investment target, Lehtonen estimates.

“With that in mind, house prices have not yet risen even proportionately.”

In addition, Finland is a suitable euro country for many euro funds, where housing rent regulation is weak.

“And as an operating environment, Finland is seen as a predictable environment and political risks are small.”

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“With that in mind, house prices have not yet risen even proportionately.”

Real estate investors Demand is already so strong and supply is scarce that, for example, German investors recently undertook to buy the Kalasatama residential tower from the construction company SRV before it could even be built.

With the increase in demand, pension companies and domestic rental housing companies, among others, have been able to better organize their holdings, for example by selling older properties in smaller cities.

Previously, foreign investors only bought ready-made items. When projects are already being bought, capital will be freed up from Finnish operators for new housing production, which increases the supply, Lehtonen reflects.

“It could slow down rents in the long run.”