Helsinki, as well as the surrounding metropolitan area (Greater Helsinki), is growing steadily as more people move to Southern Finland, mostly to work and study. Therefore, the current, significant, demand in the Helsinki real estate market will continue as more people are looking for a place to live. An intelligent real estate investor has an opportunity. In this article, we examine the best neighborhoods to invest in Helsinki real estate.
Best locations for Helsinki real estate investment
House prices in Helsinki vary a lot depending on the location and the status of the neighborhood. There are lots of prosperous areas in Helsinki where house prices have risen through the roof. These areas are located close to the city centre and/or by the sea. The farther from the city centre one looks, the more the house prices drop, especially in East Helsinki.
Here are some areas that are worth to look into when planning to invest in the Helsinki real estate market:
1. Laajasalo
Already known for its beautiful nature and easy access to Helsinki city centre, the prices in Laajasalo in the south-east of the city have been steadily on the rise. The new crown bridge alliance project-which will commerce work in 2021-will make the connection to the city centre even faster and increase real estate prices even more. Currently one needs to take a metro to Herttoniemi and then a bus (if you don’t want to be stuck in a slow bus the whole journey) to reach Laajasalo. After the bridge is functioning, you can reach Helsinki quicker. A specific area in Laajasalo to look at is Kruunuvuorenranta.
2. Viikki
Viikki has a reputation as a university neighborhood since one of the big university campuses is located in the area. The transportation links are getting better since Helsinki-Espoo cities have planned a joint transportation link called Raide Jokeri. The light rail link should be ready this year. Also, Malmi and Viikki will be connected to the city centre by a fast railway connection called VIIMA. These improved transportation links are likely to make Viikki and Malmi interesting areas to look at for Helsinki real estate.
3. Areas close to Pasila
Pasila is already getting more expensive since Tripla Mall opened at the end of 2019. Also, all trains coming from Helsinki stop in Pasila, meaning you are only minutes away from the city centre. Still the per square meter price of properties are substantially lower than in Kallio, Töölö or other centrally located Helsinki neighborhoods. Prices will most certainly grow. There is still a lot of development happening in Pasila and the surrounding areas are likely to increase in value. Some improved transportation links are being built in Ilmala direction as well.
4. Tapiola
Tapiola, located in Espoo city, is on the rise. It is already linked by metro to Helsinki city. A new shopping mall named Ainoa just opened up in the Tapiola metro station. The area is full of development and once done will add value to the neighborhood. Worth taking a look! You can reach Helsinki city in 15 mins. Additionally, Raide-Jokeri will improve Tapiola’s transportation links as well.
5. Pajamäki
One word: Raide-Jokeri. This connection link that was mentioned above in point number 2 has made Pajamäki-neighbourhood in west Helsinki-one of the top spots to look at in terms of real estate investment in Helsinki region.
6. East Helsinki
East Helsinki, especially Kontula and Mellunmäki, have had pretty bad reputations in the past but are slowly on the rise. So far, prices aren’t moving, especially in Kontula region. Helsinki city has plenty of plans to improve the area. Better transportation links and shopping mall projects make us hopeful that these areas have a bright future ahead. The plans are still works in progress, and it will take time to improve the reputation of these areas, but it will be interesting to watch. If the plans come to reality, then there is huge potential for Helsinki real estate investment in the city’s east, where prices are still relatively low.
How to predict the rise in value in Helsinki real estate?
In real estate investing, one should never trust that property will appreciate over time. House prices can get higher, which is always good for real estate investors, but there is no guarantee that it will happen. Indeed, house prices usually rise, but it seems to be true in Finland only if the house is in a big (university) city located near services. House prices grew in only three major city regions in 2018: Helsinki, Turku and Tampere.
Increased urbanization is a global trend that is also happening in Finland: people (especially young adults) don’t want to live in the countryside anymore. Instead, they appreciate a good location over a big house. A good location is key when buying an investment property. However, the risk of buying a house from the “wrong neighbourhood” is not that high in Helsinki because there are not bad neighbourhoods and the population of Helsinki is growing all the time.
Real estate investors should aim for high rental income
An investment property is an investment asset that generates cash for the investor. It should be bought only after careful calculations and risk-assessment. As we said above, there is no guarantee that house prices are going to rise (as they have mostly done in the past decades) in Helsinki. That is why the most important aspect to look when investing into real estate is the income from rents. Manage your risk by getting a steady tenant who can pay a nice rent.
In the most prosperous suburbs of Helsinki, such as Eira, house prices are very high. That is why it’s very hard to get a good average return solely from rents in these suburbs. And you need more money to buy real estate from these areas, which is never a good thing, especially if you are an average investor. Of course, these prosperous areas will likely hold (or rise in) their value, but there is no guarantee of it as the house prices are already so high in these areas.
Intelligent real estate investors should look outside the city center
In Finland, the best cities for high rental income are outside of Helsinki. Helsinki is the worst city for the real estate investor who is looking for a good rental income. By rental income, I mean rental income in relation to the price of the apartment. On the other hand, Helsinki is probably the best city in Finland for real estate investors who want their house to appreciate.
The more expensive the house, the worse the rental income is in relation to the price of the apartment (usually). That is why the best rental income lies outside of prosperous and expensive cities and suburbs.
In Helsinki, real estate investors should look outside the city center and other prosperous areas. That is, simply because the house prices are much more affordable outside the centrum, such as in Eastern Helsinki or Northern Helsinki. Eastern Helsinki especially is attracting real estate investors. It is relatively close to the city centre and there has traditionally been a more affordable cost of living than elsewhere in Helsinki.
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Joonas Saloranta covers Northern Europe investing, macroeconomics and more at the Financial Nordic blog.
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