FINLAND - Finnish real estate delivered the market's strongest performance in a decade last year, returning 11.3% -an increase of 1.3% over the previous year, according to figures published by KTI.

Property outperformed both equities and bonds, as they returned 8.1% and 2.8% respectively.

Rental growth accounted for much of the sector's strength, with a 1.5% increase in capital growth to 4.6%.  In contrast, an increase in capital values pushed income return down slightly to 6.4%.

KTI senior analyst Mikko Soutamo said international investors had "had quite a large impact" on the market but offered no certainty on whether the market had peaked.

 "It's difficult to say," he said. "If you look at last year, capital growth was higher than any other year.  I can't say whether it will continue but the investment climate is still quite positive, with no turn in yields."

Soutamo was similarly cautious on macro forecasts for the market. "Who knows what will happen in the market as a whole? There's no saying what would happen if interest rates or yields went up," he said.

In contrast to mature Western and Scandinavian markets, Finland has been characterised by a paucity of portfolio transactions and those available to investors have largely been concentrated in the capital Helsinki.

"The share of portfolio transactions is increasing but it's much smaller than the UK or France," said Soutamo. "Does it have an impact on international investor interest? I don't know, but in 2007 it was difficult to find good investible properties. There was a lot of competition."

Despite overseas investors' overwhelming focus on Helsinki, he said Finland was seeing opportunistic players "in smaller cities with higher risks and yields".

The KTI index covers €19bn in assets - around 60% of the market - held by 21 Finnish investors.