The housing market recovered during the year: apartment construction increased, the number of transactions grew and housing investments were active. Apartments formed the most attractive sector in real estate investments.

The largest cities had several new residential areas under construction. However, the long-term need for apartments will exceed the level of supply, unless the current pace of housing construction can be continued. Urbanisation is speeding up in Finland, we are still behind other European countries.

Urbanisation continues

Because education, jobs and innovation activities are concentrated in cities, urbanisation is regarded as an inevitable phenomenon which is essential for the future of Finland.

Nearly half of Finland's urban population live in the six largest cities. People move into these cities from other municipalities, and in recent years, roughly half of people moving in come from abroad. The largest cities also attract people moving from other parts of Finland, most of whom are young people.

There should be a sufficient supply of rental apartments in order to maintain rents at a reasonable level.

Promoting affordable housing

The aim of the Government is to reduce statutory regulations in order to improve innovation and employment. This aim has been poorly fulfilled in the real estate industry. To promote affordable housing, a number of means have been identified, but they have not been reflected in legislation or regulatory provisions. The pricing of planned plots, taxes on construction and housing and requirements set for civil defence shelters, together with parking and other standards that increase costs, remain unchanged.

To promote affordability, SATO uses the means that are available in the current regulatory environment. These include a growing range of apartments, complementary construction in the existing urban structure, smaller apartment sizes without making any compromises on the quality of residential life and the provision of services included in the rent.

The regulatory environment needs to be changed to promote affordable housing.

Record-high production of privately financed housing

Some 20 per cent more new apartments were sold in 2016 than in the previous year, while the volume of existing apartments sold increased by 5 per cent. The high demand for apartments is reflected in the volume of building production. It is estimated that there was an increase of 20 per cent in building construction, with approximately 35,000 apartments being constructed in 2016. According to the VTT Technical Research Centre of Finland, Finland needs 25,000–30,000 new apartments every year, depending on the regional population development. The balance of supply and demand is the only factor which curbs the level of prices and rents.

Broader range of rental apartments.

Building construction is supported by the recovery of the labour market and internal immigration towards growth centres. Furthermore, low interest rates and the availability of financing strengthen the investment environment, and households also have stronger faith in the future. In addition, the extensive need to renovate existing apartments will maintain the level of investments.

High demand for apartments, combined with the interest shown by investors, create conditions for the construction of rental apartments. However, in 2017, construction is expected to decrease to 34,000 apartments.

Rental apartment markets raise interest

Demand for rental apartments has remained high, and the production of new rental apartments is at a record-breaking level. Low interest rates make properties attractive to investors whose profit requirements are historically low. Apartments have become the most attractive sector in the field of real estate investments and, during the year, foreign investors also emerged in the markets. During the reporting year, housing investments accounted for approximately 40 per cent of the largest property portfolio transactions.

The strong growth in housing investments has increased the range of rental apartments and temporarily balanced the ratio between supply and demand in many areas. This has also increased apartment turnover.


Prices still on the up

Regional differences in apartment prices have increased. During the reporting year, the prices of existing apartments in terraced houses and multi-storied buildings increased in the Helsinki Metropolitan Area by 3 per cent from the previous year, whereas the prices went down by 2 per cent in other parts of Finland.

According to Statistics Finland, the annual increase in rents of privately financed apartments was 2.5 per cent in the Helsinki Metropolitan Area and 2.3 per cent in other parts of Finland. Rents of ARA apartments went up by nearly 3 per cent throughout the country. Even though SATO has divested its apartments in locations with a smaller population and focused on smaller apartments in growing urban centres in order to support urban development, the annual change in the average rent of our apartments was roughly 0.5 per cent. The development in rent levels is expected to remain moderate.

Investments and new concepts and services for SATO

Urbanisation and immigration provide good long-term conditions for continued housing investments in Finland. As competition remains fierce, SATO will invest in growth centres, develop new solutions for affordable housing, increase its range of apartments through complementary construction in existing areas, and develop diverse services and benefits for its customers.