Lapland’s recent tourism boom has left a number of positive impacts on its economy as reflected in the increased investments in urban housing and tourist accommodations. Investors are interested in buying in rental purposes, and there is even a housing shortage in Muonio.
Property value rising in central locations
One such major investment is the construction of a residential hotel in the Santa Village at an estimated cost of 4.6 million euros.
– There is construction of new hotels or expansion of the ones already existing all over Lapland. Tourists are coming, and more are expected to come in the near future, said Mikko Kokkonen, the CEO of Pohjolan Op-Kiinteistökeskus Oy.
According to Kokkonen, the correlation between the value of real estate and the incoming of tourists can be viewed from two perspectives: on the one hand, tourists or foreigners are not actually engaged in buying of real estate property and this does not have a great impact on the value of real estate properties; on the other hand, investors are buying property for rental purposes, and this may cause the value of those properties to rise.
– A good example is people buying flats for short-term renting purposes, such as Airbnb or Booking.com, or for long-term renting. This increases demand and might lead to a rise in the value of real estate, said Kokkonen.
This trend sharply contrasts with the types of investment people were making in the past.
– People have been buying apartments for years. Earlier, it was common for people to buy cottages or homes but not making other forms of real estate investment, said Kokkonen.
Like in other sectors, the dictates of the law of demand and supply also applies to real estate. Mayor Lasse Peltonen of the Town of Muonio believes the rise in the tourist inflow also increases the demand for and subsequently the value of real estate in Lapland.
– There is a housing shortage in Muonio, and we are looking for partners in housing construction, Peltonen said.
Peltonen termed the present prospects of real estate investments in the town located above the Arctic Circle promising.
This observation is put into perspective by Kokkonen who points out that availability and location are two important factors to consider when it comes to real estate.
– The attractiveness of a property located in a city centre is one such example. When you have land near a river or the city center, its value is high due to lack of availability of such plots. When there is short supply of any product, it means the price will also rise. On the positive side, there hasn’t been any hike in the land prices generally or in the city center.
Students and tourist speeding up flat construction
Another trend witnessed in the Lapland city of Rovaniemi, for instance, is the recent construction of flats around the city center and the university area. Last year, apartment building permits included 774 units of dwelling in the Rovaniemi area. In all, 443 new buildings were completed in Rovaniemi last year, which is the highest figure for the last 10 years, and so far this year the trend seems to be continuing.
– At least many people are eager to buy these flats. Since people are buying these flats, it means there is more construction, said Kokkonen.
Since construction of apartments is mushrooming in cities like Rovaniemi, one might ask who the new tenants are.
Mikko Kokkonen explains: – A very important group of tenants are students. Generally, people prefer to rent, since it is easy for them to change location or towns for work. For some of the others, they simply don’t want to remain tied to one place for a long time while, for some others, it is a question of not wanting to put much money to buy an apartment. But if you plan to live in a place for a long time, it makes sense to buy a property.
On the other hand, construction of residential apartments around the skiing centres in Lapland has not been growing at the same pace as 10 years ago. – The growth of apartments in these skiing centres is, however, forecast to increase but not in the same pace as in Rovaniemi, said Kokkonen.
Considering old buildings, one has to take into account the cost of refurbishing an old building vis-à-vis the cost of completely constructing a new one.
– Nowadays, it is not very cheap to make renovations on large buildings. But it is important for people to continue making renovations, because normally a building or an apartment is the most valuable asset which one owns. It might cost over a thousand euros per a quarter metre to renovate. It depends on what one wants to do. If you have a 50-year-old building which has never been renovated, then the cost of renovation is likely to be higher. However, if you have been renovating the building gradually over the years, it wouldn’t be very costly, said Kokkonen.
The value of real estate in Finland has been up since the beginning of the 1990s except for the recession period. – We haven’t seen prices coming down since the beginning of the 1990s. Then came the recession, and the prices fell. After that it has always been rising, said Kokkonen.
As Kokkonen points out, the growth in real estate in Lapland is connected to the overall growth. If Lapland is to grow then definitely more constructions will take place. Tourism is growing for instance in Rovaniemi, and the growth prospects in the real estate sector look good in that city.