Saturday, 28 June 2014

Growth of housing loans halted

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Average housing loans of dwelling units with housing loans in 2002 to 2013


"According to Statistics Finland's statistics on indebtedness, the average housing loan of household-dwelling units with housing loans was EUR 93,620, which was in real terms around EUR one hundred less than in 2012. In the early 2000s, the average housing loans grew, on average, by ten per cent per year, but the growth has slowed down significantly in recent years.

Another indicator demonstrating that the start of the downturn of the housing market.

Sunday, 15 June 2014

Finnish Housing Price falling...

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"In the first quarter of 2014, prices for old single-family houses fell by an average of 3.3 per cent from the previous year in the whole country. 
In Greater Helsinki, prices went down by 8.9 per cent from the corresponding period last year and in the rest of the country by 2.6 per cent. 
Compared with the last quarter of 2013, prices of old dwellings in detached houses increased by an average of 0.7 per cent in the whole country."
Source: Statistics Finland 


Finnish housing price have  reached a plateau, a maximum average price that most likely will be an historical one (lasting 1-2 generations?) which will slowly head downward in the next few years.

I personnaly thought prices will readjust after the "financial crisis" in 2009 but I underestimated how low and fast interest rates will fall. Here are some important facts:

  • 98% or more of Finnish mortgage rate are link to the Euribor or variable interest rates.
  • Finnish household debt level is at historical level
  • low fertility rates with a potentially shrink of the finnish population size in the years coming
  • uncertain immigration since mostly linked to the economical situation (which is not that rosy)
To me, I could bet the following:
  • 2009-2013 period was a temporary one that saw prices rise due to low interest rates and supported by two decades of rising prices that anchored expectation.
  • 2014-2019 slow downward price adjustment with slowly mindset change with regard to future price evolution
  • 2020-2025 sharp decrease as interest rise and oversupply. 
As an investment, housing will be a poor one unless the Euro currency disappear ;-)

Wednesday, 5 February 2014

Government proposes stricter mortgage rules

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"The Finance Ministry has agreed new proposals with the Federation of Finnish Financial Services that would seek to limit the amount banks can lend to homebuyers, in an attempt to see off a potential housing bubble
However, the National Coalition Party’s Minister for Financial Affairs, Jan Vapaavuori, insisted on Tuesday that there are currently no signs of the market overheating, and said the announcement of the proposals was not related to the state of the property market or the mortgage market. He also claimed that the measures would help prevent problems in future. 
Under the proposals, a bank may grant a mortgage of up to 90 percent of the value of a property, and buyers must put down ten percent of the price of the sale upfront. First-time buyers would have some leeway, however, with the loan-to-value cap set at 95 percent. 
The tabled measures are part of the government’s banking reform bill, which is expected to have its final reading in March and April, and would not come into force before July 2016. The Finance Ministry said they decided to announce the proposals early because the issue of a potential loan ceiling has aroused widespread interest."

Monday, 24 June 2013

Finnish Housing bear market ... two decades?

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That's it.


In the past 4 years the market was fuelled by cheap interest rates and stubborn housing buyers & sellers thinking that there is only one direction for the price, going up - the sky being the limit. And of course, also fuelled by the media & bankers - the devil being in the details...

Now, the main question is for how long the correction will last..
I think this time it is different that 1990's (short, abrupt correction then massive and persistent recovery ) - it looks more like a japan style housing scenario - a painfully long drop of prices over two decades?

At the end, we are entering an era where elderly will rule the kingdom :-), as Japanese did in the early 90's- a situation that saw their housing market peaking.

Also , the only chance for Finland is immigration, but immigrants come for jobs, would Finland  be able to attract enough of them? I have some doubt unless there is an economical shocks somewhere in the southern Europe or in neighbours countries :-) - there is , but it is temporary, I think those countries are restructuring themselves (economically & politically), like a phoenix they may arise from ashes....unless they don't...then...

While at the same time beyond the Turku region, far away in a land conquered half a century ago, an important event is unfolding:  The US central banker blinked eyes, and spoke of reducing its artificial monetary support which sent interest rates in the north direction and scared the stock markets around the world.

I think, without being superstitious, 2013 is the turn around in this century :-) (boom boom)

Saturday, 16 March 2013

Largest Cash Robbery in European history

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...but first let's examine one the biggest robbery which happen to occur in great Britain :
"The Securitas depot robbery was the largest cash robbery in British history. It took place on the evening of 21 February 2006 from 18:30 GMT until the early hours of 22 February 2006. Several men abducted and threatened the family of the manager, tied up fourteen staff members and stole £53,116,760[1][2] in bank notes from a Securitas Cash Management Ltd depot in Vale Road, TonbridgeKent. 
The Bank of England, to whom the money belonged, was reimbursed £25 million by Securitas AB the same day, and assured the public that Securitas would make up any additional loss
On 23 February 2006 at around 19:00 police confirmed the arrest in Forest HillSouth London of a man aged 29 and a woman aged 31, on suspicion of conspiracy to commit robbery.  
On 28 January 2008, the jury returned guilty verdicts on Stuart Royle, Jetmir Bucpapa, Roger Coutts, Lea Rusha and Emir Hysenaj. John Fowler and Keith Borer were cleared of all charges.[21] The next day Emir Hysenaj was sentenced to 20 years in prison with an order that he serve a minimum of 10 years. Stuart Royle, Lea Rusha, Jetmir Bucpapa and Roger Coutts were given life sentences with an order that they serve a minimum of 15 years." Source: Wikipedia
... coming back to todays story, we have just witnessed one of the biggest robbery in the history on Europe. Apparently, my sources told me that the cypriot people were robbed during the week end in broad daylight by a well organised team. 

Apparently it was prepared well in advance and seem to be premeditated. a total of 6 billions euro were taken from poor depositors (some keen accountants, through  a process called reverse engineering, calculated that each depositor were robbed the equivalent of 6.5% and the less poor of 9.9%).

The only video footage shows that the master mind was seen waving the european flag... 
"Euro-area finance ministers agreed to an unprecedented tax on Cypriot bank deposits as officials unveiled a 10 billion-euro ($13 billion) rescue plan for the country, the fifth sinceEurope’s debt crisis broke out in 2009. 
Cyprus will impose a levy of 6.75 percent on deposits of less than 100,000 euros -- the ceiling for European Union account insurance -- and 9.9 percent above that. 
The measures will raise 5.8 billion euros, in addition to the emergency loans, Dutch Finance Minister Jeroen Dijsselbloem, who leads the group of euro-area ministers, told reporters early today after 10 hours of talks in Brussels." source: Bloomberg 

Monday, 18 February 2013

Finland's Neighbour Debt Bubble...

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“Swedish households today are among the most indebted in Europe and we cannot have household lending that spirals out of control,” Martin Andersson, the director general of the Financial Supervisory Authority, said in an interview in Stockholm. 
The FSA is ready to enforce a cap limiting home loans relative to property values to less than the 85 percent allowed today, Andersson said 
“What we saw in the 1990s crisis was that if you bought a home with a 90 percent debt ratio in 1991, it took about six or seven yearsuntil you were back at a level where you had a property that was worth more than your mortgage,” Andersson said in the Feb. 13 interview. “That is a very long time.” 
“One should be prepared for a downturn,” Andersson at the FSA said. “House prices cannot just continue upwards in eternity.” source 
Some charts ...

Thursday, 31 January 2013

Significant milestone...

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I think it is significant... Household income (first pillar) growth was a potential explanation for the housing rise (combine with faltering interest rates (second pillar)). So the first pillar is gone, and the second is lurking in the horizon (i.e. raise in interest rates) ...

Tuesday, 1 January 2013

Short Status...

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Short status on a pretty peculiar Finnish housing bubble:


Interest rates, especially the 12 month Euribor (for which 98% of the Finnish population have locked their housing mortgage rate), have gone down from a high of 5% beginning of the decade to reach almost the zero level in 2012 as shown in the chart above.

 Central banks have been fighting deflation since the crisis started in 2008, lowering rates to unchartered level. The effect was to support artificially all asset prices.

In Finland, as highlighted earlier, the housing market is hugely sensitive to short term interest rates(Euribor) , and the collapse of the Euribor to almost "Zero" helped avoid a readjustment in the short run.

 This has renewed optimism in the Finnish housing market and induce the belief that the housing market is sound - a very dangerous dangerous asumption.

 In addition, this optimism in the market has led housing builders to ramp up their production after a freeze in 2009 (at the peak of the crisis). Eventually, housing stocks are accumulating as more and more housing are being put in the market without finding any buyers (even though interest rates are at level not seen since the creation of the republic of Finland).



 Also the economical outlook (see figure above) is deteriorating for an export oriented economy, added to that a ageing population with potentially (in the next decades) a shrinking population...all points to a scenario which tend to be similar to the Japanese experience.


And I let you compare it with the Finnish market, with a potential historical peak reach during 2010-2012:


Happy New Year 2013!!

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Sunday, 11 November 2012

Canary in the coal mine ...

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The last time we saw the 2 Years government bond reaching the same historical low,was in 2 August.

It clearly shows that investors are looking for safety, ready to pay for keeping their money (albeit a low amount). Basically the government is playing the role of a safety box...

For some who are interested in the french market, a market that also behaved in the same way as in Finland (i.e. was not affected by the current crisis), You can find a report genereated by one branch of the french government. It has very good and credible argument, and actually I like the idea shown in the page 79: www.cgedd.developpement-durable.gouv.fr

Thursday, 8 November 2012

Flying Piggies ...

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"In a report titled: “Just don’t look down some house markets are flying again” Goldman Sachs argues easy money policies by the world’s major central banks has had a ripple effect on countries which have avoided the worst of the global financial crisis, boosting their house prices.
According to Goldman, there now exist housing “high-flyers” - countries that have experienced real house price increases and “low-lyers” - countries where the housing market downturn appears to be more protracted.
“High flyers” include Germany, Finland, Norway, France, Switzerland and Israel as well as Canada and Australia." Source: CNBC

"What goes up, goes down", ConfuciusHousingFinland

Wednesday, 17 October 2012

Nor"th"way

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Norway’s Housing Boom Could Lead to Spain-Style Bust, Say Some


Norway’s housing sector, which has seen prices jump by almost 30 percent since 2006 — could end up replicating a pattern of housing booms and busts seen across the globe, from the U.S. to Japan to Spain and Ireland, according to a report by Bank of New York Mellon.

The rest of the article can be found here : http://www.cnbc.com/id/49443611

I wonder if Northern real estate is overheating...

Also it is interesting to see that Finnish mortgage rates are the lowest in Europe (since there all based roughly on variable interest rates based on 1 year Euribor)