The predictability of office property returns in Helsinki

The aim of this paper is to forecast the office property returns in Helsinki CBD using both short‐run and long‐run econometric specifications. Real economy, monetary and financial market indicators are included in these specifications to explain the variation in office property returns and forecast them. The paper illustrates the steps that analysts can follow to select models based on common diagnostics criteria and ex post forecasting evaluation tests. The findings of this research are in accordance with the results of previous comparative research in Europe and suggest that the growth of the gross domestic product in Finland is a key variable for modelling and forecasting office property returns in Helsinki. Moreover, the analysis indicated that information from a long‐run relationship of the gross domestic product and the real office return index should be monitored in the future as a way of improving the forecasts through an error correction model. It is predicted that Helsinki office returns will show a growth of about 7.1 per cent on average in the period 1999‐2001.