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Property investors ready to take greater risks in Finland

Typical examples of these kinds of properties include half-empty office buildings that are past their prime but located in good areas. A comparison of the prices of these properties with relatively new, fully-leased buildings the difference is usually four-fold. Generally speaking, you can get a weaker property for less than EUR 1000/m2 whereas the price per square metre in a relatively new office building can easily be more than EUR 4000/m2 even if there is no significant difference in location.

Leverage made possible by the low interest rates together with competition over interesting properties also partially explains the investors' increasing interest. However, property development is especially challenging for foreign investors who do not have an organisation in Finland. The banks are also reluctant to give loans to these properties especially with a leverage of more than 50 per cent, so a rise in prices similar to that of 2005–2007 is not expected in this sector.

The transaction market is active outside the Helsinki metropolitan area as well and so far mainly by domestic funds.

Growth brought on by urbanisation is the greatest booster of Helsinki's thriving property market. Finland is lagging behind the property market in the rest of the Europe and so we still believe in rising prices and increasing demand outside the Helsinki city centre.

There are likely to be fewer major portfolio arrangements than last year so our prediction for this year's total volume remains between EUR 4–5 billion. The healthcare, social welfare and regional government reform (Sote) is expected to entail property arrangements of approximately EUR 6 billion but they will most likely not be listed as property transactions on market terms.

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Annika Wahlund Communication Manager