The pandemic's impact on the property market remained low.
Covid-19 continued to affect the property market last year. In the beginning of the year, the restrictions caused by the second wave of the pandemic kept the transaction volume low, but improved situation in the summer and brisk economic growth throughout the year eventually increased the volume to a level clearly above the year before. Despite the pandemic continuing, properties have maintained their position as a very attractive investment alternative, as interest rates have kept on a very low level and the impact on the rental market, too, eventually remained surprisingly low.
Pandemic impact on vacancy rates small for now
The impact of the pandemic on the office and retail market seems small – at least for the time being. The office vacancy rate of the HMA increased somewhat last year and is now at 13.7%. It is interesting that despite the rise in vacancy rates, prime rents for offices began to rise already during the autumn. Although the overall office vacancy rate of the HMA is very high, there is relatively little office space vacant in some sub-markets, such as in the vicinity of the CBD and in Keilaniemi and Pasila. Indeed, division into successful and challenging office markets seems to continue in the HMA. Regarding retail space, too, it seems that the worst may have been avoided and the situation is surprisingly good in terms of vacancy rates. The vacancy rate of retail space in the Helsinki CBD – which has perhaps been affected the most by the pandemic – did not increase during last autumn either.
Inflation on the rise after a long break
After the gloomy 2020, economic growth in Finland was rather brisk last year. According to the Bank of Finland, our GDP grew circa 3.5% last year. For this year, too, the Bank of Finland expects a fairly good growth of about 2.6%. It seems therefore that economic growth and low interest rates continue to support the property market.
However, inflation is entering into debate after a long break. The annual change in consumer prices in Finland accelerated to 3.5% in December. In the eurozone, the change in consumer prices was up to 5.0% in December. The combination of higher inflation and exceptionally low interest rates creates a very interesting situation for the property market this year. In the short term, the situation is unlikely to weaken the position of properties in relation to other investment categories, as out of the most important investment categories, they may be the one that can do well even during inflation.
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