Hot Properties: How Finnish-Russian Relations are Creating Risks for Russian Property Buyers
Growing Restrictions on Russian Nationals
Historically, Finland has avoided confrontation with its Russian neighbour by maintaining a strict neutral position. However, the ongoing war in Ukraine has worsened Finnish-Russian relations, with the Finnish Prime Minister Sanna Marin announcing that Finnish-Russian relations have changed irreparably. A full-scale Russian invasion of Ukraine in 2022 led Finland to abandon its traditional policy of nonalignment and apply to join NATO. The invasion stirred fear among the Finnish public, invoking the memory of the unprovoked Soviet aggression of the Winter War of 1939–1940, with the Finns worrying that history would repeat itself. As a result, heightened security concerns have forced Finnish politicians to change their policies drastically. Among those were policies related to Russian purchases of properties in Finland and the associated advantages.
The decision for Russians to purchase properties in Finland had been largely galvanised by changes imposed by the new restrictions regarding the entry of Russian nationals traveling to Finland which entered into force in September 2022. This saw tourist visas no longer being issued to Russian nationals or even accepted for application. In addition, Finland could now revoke existing visas held by Russian nationals at the border if certain entry conditions were not met. As a result of these policies, the number of Russians purchasing properties in Finland in 2022 reached a record high, with a 64% increase compared to the previous year, with some Russians choosing to share property ownership so more of them are eligible for visas. The purchase of property in Finland has traditionally been considered a significant supporting factor for non-EU and non-EEA nationals, and so is seen as a beneficial investment for many Russian nationals with economic or politically related interests in Finland.
Currently, in order to buy property in Finland, citizens from non-EU countries, including Russia, must apply for a permit. The legislation was introduced in 2020 primarily to protect Finland's national security. Since then, most of the applications have been submitted by Russian citizens. However, in September 2022, the President of Finland Sauli Niinist announced that he wants to make it more difficult for Russians to obtain travel visas by claiming ownership of real estate in Finland – which are usually flats or summer cottages.
Homes Under the Geopolitical Hammer
Niinist’s criticism regarding the uptick in Russian property buyers is linked to ongoing security concerns, with the Security police in Finland having warned for several years that Russian real estate deals in Finland could involve military properties. Indeed, in a 2016 report, the Finnish Security Committee stated that Russian-owned real estate would pose a national security threat, since it might hamper mobilisation in the event of a crisis.
Finland’s concern over property purchases posing a threat to its national security was illustrated by its government’s decision in December 2022 to block an attempt by Russian citizens to buy property in Kankaanpää, on the southwestern side of Finland. Three Russian citizens visited Imatra in October 2022 and completed the documents needed to purchase a former retirement facility, which they reported would be used for “leisure or recreational purposes”. There was a single email address and street address shared by all applicants: a nondescript suburban apartment block in Russia's second-largest city, St. Petersburg. The information provided raised suspicion among Finnish officials, who decided to not permit the purchase, citing national security concerns.
It was clear to authorities that the desired property was within walking distance of the training facility for soldiers, the Niinisalo Garrison. The garrison hosted the joint Finnish-NATO training exercise Arrow 22 last May, which tested armoured brigade readiness. There is a clear view of some of the roads of the training facility from the former retirement home. Consequently, as a result of Kankaanpää's "special role" in securing Finland's national defense, the government rejected the transaction, arguing that the purchase of the property could interfere with the organisation of national defense and the protection of Finland’s territorial integrity.
This is linked to another security concern, given Finland’s 1340-kilometer land border with Russia. There is a worry that after the end of the Ukraine war, Russians might build new garrison areas, try to deploy more military units, move long-range missile units, and use military instruments close to the Finnish border. As such, Finland’s move to stop real-estate deals that endanger national security is a logical move. It will however see the primarily Russian-fuelled foreign investment in Finland’s property market take a significant hit going forward.
Overall, the case of Kankaanpää illustrates that due to Russia's full-scale invasion of Ukraine, suspicions about Russian activity - official and civilian - have increased in Finland. It also serves as an example of Finland’s attempts to cut ties with Russia, with other decisions including buying back a Finnish ice hockey team owned by the Russians and rescinding a contract to build a nuclear power plant with Russian state-owned nuclear enterprise Rosatom. Given Russia’s ongoing aggression in Ukraine and its recent announcement of halting participation in the New START nuclear arms treaty, Finland’s security concerns are only likely to increase, which will likely see further restrictions on the activities of Russian nationals.