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Characteristics of Finnish real estate market (Economic attributes…
Characteristics of Finnish
real estate market
Physical attributes
Immobility/fixity
Land is tied to a specific place. causing demand for land is high in growing cities and in the country side land demand is low
If the buildings of real estate destroyed, the property would remain in value according to its location
Property transaction is a local attribute.
Demand have to be also local. Urbanization concentrates most of Finnish people in the smaller area.
Value changing effects each parcel/property in the same area
one place supply cant satisfied another place demand
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Indestructibility
Land cannot be destroyed/ it is forever
Value of land can still be almost destroyed in the different conditions. Depends location.
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Permanence of real estate means that you can develop and improve the area with very long view
Heterogeneity
Every parcel is unique.
Heterogeneity is the main difference between real estate market and factor of production market
Ordinary differenses
Location, size, shape and topography
Zoning/title resrictions
Causes problem of pricing parcels
Valuation is often very complex
External factors effect the value of the property very strong
Causes that real estate market is not perfectly competitive
Land policy
Poor information
Quality of public infrastructure
Economic attributes
Situs
Taxes and fees
In Finland taxes and different fees are decided by the government or the local council
Real property tax
Based on the taxable value of the property
depends use of the property
Do not apply the land which are used in forestry and agriculture
Special tax for unbuilt parcels
Reform is coming
municipal tax
Varying between 17% and 22.5%
Capital gains taxes
Investment/rental income
Transfer taxes
Corporate taxes
Value-added taxes
The Finnish tax ratio is among the highest in OECD countries
Other situs factors are influencing locational decisions, direction of population growth, availability of services and utilities, shifts in centers of trade and manufacture and changing life styles
Scarity
Especially In certain locations (Helsinki CBD) land and space are scare resource.The supply of land cant satisfying demand of scare land
Interdependence
Mutual interaction of use
Improments
The value of a property can be affected by developing and improving it
The property can be sold to anyone you want
municipal pre-emption
Expropriation
Agreements of transactions are pretty flexible
Government and municipalities can influence the real estate market in many ways.
Zoning
Property tax
Land policy
Durability of invesment
Transactions take sometimes a long time
Take many years that you get profit for your investment
Transaction cost are relatively high
Some cases real estate could be low liquidity in Finland
Large unit
Psychic income and sentimental value
Institutional attributes
Real property law
Finnish legislation
Property owning in Finland means that you owning the land and the buildings on it
Can only owns the buildings and have a long land rental agreement
Rental agreements are very liberal. Basically everything based agreement between the parties
Specific form of real estate transaction
Public regulation
Real estate commodity and product
Community plans, zoning ordinances, rent control, subdivision regulations, laws pertaining to mortgage finance.
When you own the limited company which owns the property the owning is more flexible, than if property has a several owners
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Flexible transactions and rental agreements
Local and regional custom
Customs and habits of Finnis real estate market
Transactions have to do in accordance with the specific procedure which based on the law
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Gross rent
Associations and organization
Assosiations and organizations in Finnis real estate market
Limited companiens
Real estate company/corporation
aparment house company
Mutual real estate company
Municipality
Zoning
Taxes
National land survey of Finland
Cadastral surveys
Goverment
Interventions of public sector
Institutional investors
Real estate investment companies/REIT
Banks
Pension insurance companies and other pension schemes are very big real estate investors on the Finnish scale
Listed property sector
Market attributes
Localized competition
is the result of immobility, heterogeneity and durability.
In Finland localized competition is more true residential real estate market than commercial and industrial real estate market
Localized competition is significant especially second tier and small cities
Stratified demand
Changing in in housing preferences
The popularity of rental housing has also increased
Demand of small and well located apartments are increased resently
Low liquidity
purchasing power of consumers
Development of community, need of land and demand
Relatively uninformed participants
Lack of information
Confidential transactions
Usually trancsactions are public. They registered an published by the NLS
Finnish real estate market is very transparent internationally
if the buildings were to be destroyed, the property would remain in value according to its location
Lack of information