Newsec’s Spring 2024 Finnish property market report was published earlier this week. It can be downloaded täältä. Downloading requires providing contact information. If you do not wish to do so, I can send it via email if necessary.
Although the report focuses on Finland, the drivers are practically the same regardless of the country: inflation, interest rates/monetary policy, a sluggish economic situation, and general uncertainty. What did I forget to list?
The real estate market is expected to normalize and turbulence to decrease towards the end of the year, as long as inflation falls and interest rates follow: “The biggest risk in the current scenario is that inflation refuses to drop the ‘last mile’. This may be due to new supply disruptions caused by geopolitical disturbances. Inflation may also refuse to fall because economic growth is stronger than expected and wage increases are larger than anticipated.”
According to Newsec, there are more potential buyers in the market than before. However, the willingness to buy does not guarantee an increase in transaction activity. Everyone is waiting for interest rates to drop.
On the other hand: “Although prime yield requirements have risen by 70–170 basis points during the current cycle, the rise is still smaller than the 320 basis point rise in the Finnish government bond yield” – “due to uncertainties in the real estate market, it is unclear whether the current narrowed risk premium is sufficient to revitalize the market.”
A few useful graphs picked from the report. The report has separate sections for each property class (residential, offices, industrial and logistics, retail, social infrastructure, hotels).