Friday, 21 December 2007

Merry Christmas And Happy New Year!

Nordea: "Loan Payment With FlexiPayment"

"Change your loan payment with FlexiPayment"

"Sometimes cash is up, sometimes it’s down. With FlexiPayment linked to your housing loan it is easier to balance your finances."

"When all bills seem to fall due in the same month, you can decrease the loan payment for that month or set it to zero without requesting the bank’s permission. Decreasing or skipping a monthly payment means that the loan period will extend correspondingly. And when it seems that you have some extra money, you can pay a bigger installment than normally - and shorten the loan period. In any case, you pay the loan interest every month; the right to change concerns installments only."

Thanks to Anton for the content. I have to say, I'm a bit shocked to read those kind of Bank recommendations in the middle of a credit crisis...On one hand, they might be trying to make solvable people that might not be in a longer term, and at the same time they are trying to stretch even more the consumer debt burden.

Effectively what they are trying to do is an interest only mortgage. That's one of the many reasons of the subprime crisis in the U.S.

Indeed affordability is stretched, so when you are at the peak then those kind of system are put in place...

I'm wondering what the Finnish Banking Watchdog is doing?

Irish National House Prices Plumetting

Irish National house prices fell on average by 6% in the period January-November 2007

With an estimated 10,000 empty apartments in the Dublin area, builders are opting to rent them out rather than try to sell them. The former gasholder at Ringsend is one of a number of newly built apartment buildings in Dublin that is lying empty as developers adopt a wait-and-see approach in the ailing new homes market.It is estimated that there are more than 10,000 empty units in the Dublin area. The vast majority of these are new apartments which have either failed to sell or have not been put on the market.

Source: FinFacts

Home Ownership Still Cheaper Than Renting, Is It?

"Owning one's residence continues to be a cheaper alternative than renting, reports the daily Helsingin Sanomat." By the way large income from Helsingin Sanomat is coming from advertisement i.e real estate company. Among that, they own the popular oikotie, a web site that charges property sellers a fee for advertising their flat for sale...So maybe they are now seeing a loss in revenue thus a campaign of deception and disinformation.

"The report quotes the Pellervo Economic Research institute PTT to the effect that the total costs of living in a self-owned residence are only about 60% of the expenses of a rental."
PTT, there are the same guys who said that in 2000 there was no overheating ... So those always appear on the screen when things are on fire... :

In October 2000, Vesa Vihriälä, heads the Pellervo Economic Research Institute (PTT) in an article published by Helsingin Sanomat was saying :"Perhaps this will still the cries of overheating that we have been hearing for three straight summers. Personally I still do not regard the economy as in an overheated state".
Reference: "Recession time again, or not? The experts don't believe it's coming quite yet"

"During the late 1980s and early 1990s, the opposite was true. At that time, it made more economic sense to rent. However, since the mid-1990s ownership has been less expensive."

"The paper says that if rents continue their upward trend, home ownership will become increasing attractive. On the other hand, high purchase prices, especially in the capital area are a barrier to ownership for many people."
Don't be fooled by those kind of article. Those have always self interest and don't care putting people into trouble. See as well another post for those "Economists comments"

Now property prices are very expensive (see how far price have risen in 10 years) and prices are declining (3%) at a time of economic uncertainty. My advise is to wait and see. Remember a 10% drop on a 200000 euro property is 20000 euro saved which will cover the rent for at least 1 to 2 years. So you have time to evaluate the market direction and time to find the right property. Making decision in hurry increase the probability of mistakes.

The professional investors are usually smart and informed. Just have a look to the property companies (see previous post, and in particular YIT), they have shed 50% of their value in just 6 months...So Professional investors understand that investing in property is not good for the next year or more...

Source : YLE

Thursday, 20 December 2007

Construction Cost Soar...Not For Everybody

"Ajankohtainen Kakkonen revealed that Polish workers are being paid less than a fifth of a Finnish labourer's wages. "

"The government-owned developer in charge of the site, Senaatti-kiinteistöt, said it had no idea this was going on."

"The Finnish Construction Trade Union, however, says that this is common practice particularly on governemnt sites. They say the problem lies not with the labour laws themselves, but in their supervision and application to foreign workers."

"I've wondered for a long time why state and municipal construction sites in particular allow such neglect of labour laws on their sites," says union chairman Matti Harjuniemi.

I'm not sure on which side I will stand here. The Construction Union are trying to protect the purchasing power of their members against the purchasing power of housing purchasers and renters.

In Europe, we are supposed to be in a single market, so free flow of good and labors should be an advantage. Unfortunately, in Finland they have set "firewalls" through Tax (Customs: , for example car tax) , trade barriers (state monopoly: Alko, Gambling ) and foreign labors "inflexibility".

Source: YLE

The Untouchable

Interest on loans

"If the taxpayer has borrowed some money, he is eligible for tax deductions for paying interest on certain loans. The general rule is to deduct the payments of interest from capital income. But if the taxpayer does not have any capital income, the deduction will have to concern earned income. The amount to be deducted is 28% of the paid interest (the 28% being the tax rate on capital income). In this way, the tax benefit is exactly the same as if the deduction had been made from capital income."

State to subsidies construction of rental housing in Helsinki region

"At current costs, rent per square metre is between EUR 14 and 15 in the Helsinki region.
Local authorities in the region calculate that a subsidy of EUR 28.000 for the construction of an apartment would bring down rents by EUR 1.80 per square metre."

"The state is demanding that local authorities hand over reasonably priced parcels of land for use as rental housing. "

Finnish civil servant's yachting investigated as bribe-taking

Finnish national daily Helsingin Sanomat reported Thursday that Helsinki police suspected the deputy harbourmaster of the Port of Helsinki of accepting bribes from tugging company Alfons Håkans.

Bribery, I though it was commonly used in many companies to get or keep contracts. Right it is usually done in smart way...

Have you ever wondered that TAX DEDUCTION and SUBSIDIES have always benefited the one in power especially those politicians in charge of housing policies.

We know that Owners can deduct interest paid on housing loan. This has only contributed to higher housing inflation. At the end it's the renters that are paying the bill by higher rent as cost soared.

Now, those same people are putting in place some scheme to artificially keep the current high level of housing prices by NOT reforming key areas . By not acting or dragging their feet they only contribute in creating imbalance, the longer it stays the bigger the impact will be.

Remember that our economy is heavily relying on internal consumption, so by increase debt burden on those same consumers, the society is shooting at its own feet. The US is currently experiencing it, UK will same as Spain, Finland and others.

Regarding Taxation of unused Lands , it's at a shamefull level and why is that? you should know the answer...

Source : VERO, HS

ECB: Is There A pilot In The Plane?

"As regards economic activity, incoming information confirms the sustained nature of economic expansion in the euro area, with real GDP growing by 0.7% quarter-on-quarter in the third quarter, while indicating some moderation in the fourth quarter."

"Overall, the economic fundamentals in the euro area remain sound. Looking ahead, Eurosystem staff projects annual real GDP growth to lie between 2.4% to 2.8% in 2007, between 1.5% and 2.5% in 2008, and between 1.6% and 2.6% in 2009. "

"This scenario is based on the expectation that the global economy will remain resilient, with the slowdown of economic growth in the United States partly offset by the continued strength of emerging market economies."

"However, in view of the potential impact of ongoing financial market volatility and re-pricing of risk on the real economy, this assessment remains surrounded by a high level of uncertainty. And in the Governing Council’s view, the risks surrounding this outlook for economic growth lie on the downside."

So if I try to read Mr Trichet's mind, that would be like that: Trichet in front of the parliament:

"Damn it feels uncomfortable to be in front of those politicians, they just spent their energy to keep power and be reelected... and it's damn hot here..."

"Well how is the economy...not good boy not good...we had to print like hell Euros, billions of them, to covers the A*S of those brainless bankers...we even run out of ink just ... "

" year we will grow at potential, damn if they just know that we are in deep trouble. On one hand the real estate explosion that we are going to witness in all corners of that the raging inflation from the Baltics...we are losing the battle..."

"what? indeed the European economy sounds good...I rather prefer be somewhere else and have some Martini to forget our misjudgments during 2002...I should never have listen to this damn phone call from Alan...Deflation he was worry no housing bubble...."

"the risks surrounding forecasting is to the downside on the outlook to the downside economical risk...just hope they don't understand what I'm talking about..after all it's all psychology...maybe i should just tell them...we are in deep Sh*t..."

Source: ECB, Hearing in front of the Parliament.

Wednesday, 19 December 2007

Finland World's 7th Most Expensive Country

World Bank rates Finland world's 7th most expensive country

"Finland is the seventh most expensive country in the world, according to a World Bank study quoted by Swedish business daily Dagens Industri on Wednesday."

"The rest of the Nordic countries together with Ireland and Switzerland edged ahead Finland in the study, which compared prices to those in the US."

"The top 20 includes five non-European countries, with Iceland rated as the most expensive country in the world."

Surprised? I guess not... High housing prices have completely eroded the sense of value of money... So what, bread rising from 1.20 Euro to 1.80 Euro...I don't see any see many have bank loans of hundreds of thousands of Euro so a 50% inflation on bread is peanut...

ECB: No Rate Cut Ahead

European Central Bank President Jean- Claude Trichet said his economy faced a "more protracted'' period of elevated inflation than previously expected, signaling no imminent plan to cut interest rates to ease a credit squeeze in financial markets.

"The risks to price stability over the medium term are clearly on the upside,'' Trichet told the European Parliament's economic and monetary affairs committee in Brussels today. "The ECB's governing council stands ready to counter upside risks to price stability.''

Risk of price stability? I think only the ECB and the statisticians believe that prices have been stable in the past... I think The ECB team should drink some strong coffee to wake up to the reality.

Tuesday, 18 December 2007

Lender Of Last Resort

"Emergency help for financial markets entered new territory on Monday as the European Central Bank announced it would on Tuesday offer unlimited funds at below market interest rates in a special operation to head off a year-end liquidity crisis."

"The European Central Bank loaned 348.6 billion euros ($501.5 billion) for two weeks to banks to bring down the cost of money at year-end."

"The ECB said 390 banks bid for the two-week loans at a marginal rate of 4.21 percent."

"President George W. Bush warned “it will take a while to get through the housing bubble” but reassured Americans “we have got a strategy”." Well the republican have about one year to rebuild their damaged reputation before the democrat takes power in 2009.

The ECB will lend to the banks, believe it or not at a rate of 4.21%. The credit growth is at record high and still they are willing to maintain it, creating imbalances that generations have never seen.

Why do they do that? is it because they want to bring back to control the "credit monster" they indirectly helped to engineer? or are they trying to put time on their side to sort the mess they miscalculated?
Never the less what they want is to ease credit "suffocation" (indeed, 4.8% is too high?) at around the year end. We know that beginning of next year lots of reset are going to happen, they don't want to create massive insolvencies among consumers...

At the end it's better to deflate a balloon slowly then to burst it with a big bang!

Source: ECB, Bloomberg, FT


The consumer loaded with debt still disconnected with reality...

Slowing economy (Stagnation) and rising prices (Inflation) gives the unwanted "stagflation."

"We are beginning to get not stagflation, but the early symptoms of it,'' Greenspan said.

In time when the economy is slowing or loosing momentum, the Central Bankers used to lower interest rates to "kick start" it. At a time when inflation is high or getting dangerously out of hand, this is not an option unless Central bankers have the confidence that inflation won't be a threat. Remember the ECB mandate is to maintain inflation at around 2%.

We are not any more in the mid 90's or in the beginning of this decade where high inflation was a temporary phenomenon. Now with high food price, high oil price, high house price, high...well everything...lowering interest rates is like throwing oil on the fire.

"Wheat rose above $10 a bushel for the first time, bolstering prices for other grains and oilseeds and stoking inflation." reported Bloomberg.

Again it won't be the 10% wealthiest that will be hit first but the rest. The purchasing power of the "middle" class and the poor has been eroded at a fast pace.

I'm afraid the central bankers overconfidence have let now the genius out of the box. By allowing cheap credit for too long it created an unprecedented World Wide Economical boom that is now putting a stress on all sorts of commodities.

By providing unlimited liquidity they have managed to drain at a record rate the limited amount of commodities.
In order to sort that out, let's just hope that they won't take the path they did in the late 70's or 80's... if so, the housing market will, with no doubt, know a hard landing...

Source: CNBC

Monday, 17 December 2007

London, Biggest drop in five years!

You all remember Michael Jackson and its way of defying gravity. It was like nothing will make him fall. The real estate in the UK was somehow behaving the same way, defying common sense rules and the show was surrealist. but in the last two months the party has ended... a little bit like a very long night of heavy drinking, everything looks great until the morning. The headache starts and you promise yourself you won't drink any more...

Here is what happen in this morning:

"London Leads the Biggest U.K. House-Price Drop for Five Years"

"London led the biggest drop in U.K. home values for at least five years this month as higher mortgage costs and the prospect of further declines in prices kept away buyers, a report by Rightmove Plc showed."

"The average U.K. asking price fell 3.2 percent to 232,396 pounds ($473,437) from November, the largest decline since the survey of real-estate agents' listings began in 2002, Britain's most-used property Web site said today."

"London home costs dropped 6.8 percent, also the most recorded by Rightmove."

Source: Bloomberg

Friday, 14 December 2007

Finnish Housing Prices Declining

"Prices for detached homes declined in the third quarter, Statistics Finland reported on Friday. Meanwhile the overall inflation rate was 2.9 per cent in November."

"In the July-to-September period, house prices came down by 2.8 percent on average compared with the second quarter of this year."

"However the average cost of single homes remains four percent higher than last year overall. In the Helsinki region, prices in the third quarter were 6.4 percent higher than a year earlier. Elsewhere they rose by 3.7 percent in a year."

"The cost of vacant lots for detached houses climbed more sharply, up 8.3 percent in a year. However they were 2.3 percent lower than in the spring quarter."

I can tell you that in "average" prices have come much more than the 3% reported. I have been examining prices of flat in some key area in the past 6 month and prices have already been lowered by 10% albeit there were set at an unrealistically high level.

Remember the economy is still holding, unemployment is low and yet prices are down. This is an unusual phenomenon that just show how stretch prices have been.

I expect prices to deteriorate from October to December and this will accelerate in the first half of 2008. The main reason is due to the high level of borrowing cost, tightening of credit standard and most important the buyer and seller psychology is changing.

Source: YLE

Breads On Sale!

After Latvia scary inflation figures, here is Ireland joining the club.
"Irish Annual Consumer Price Inflation increased to 5.0% in November"

"Food prices were another culprit.... As recently as last April, inflation in these items was close to zero; now it is 5%. Flour was up 20% in the month, 42% in the year. Eggs, biscuits, milk, bread and sweets all rose strongly and many of them are" said Pat McArdle, Chief Economist of Ulster Bank.

It's funny, Irish grocers have made 40% profit by just keeping Flour in their storage. It's growing faster than gold!. Seriously, are central bankers credible? why don't they fulfill their mandate? oh yes it's only headline inflation, is it really? what about about if it is structural and that prices are here to stay elevated. I start to be sceptical on their ability on keeping price under control.

In the past 20 years, china acted as a deflationnary force, now it's acting as an inflationnary forces as its citizens are now competing on resources such as food.

Germans bankers have been the most vocal. The bundesbank has still in memory the 30's inflation getting out of control triggering the darkest period of their history.

Investors are calling the ECB to cut interest rate. If they Bend as the U.S. did , then welcome back to the dark ages....and I'm not even talking about the consequences on the housing market...

Wednesday, 12 December 2007

Spain Experiencing A Sharp Slowdown

Julia Gavin sold more than a house a week as the Spanish real-estate boom peaked last year. Now that business is drying up, she's sharing leads with competitors, reckoning a partial commission is better than none at all.
"We're up to our ears with work, but no sales,'' says Gavin, 52, who works near Madrid. "It's horrible.''

Gavin and her clients are paying the price. In one case last month, she says, she thought she had a sale after three months of negotiations among buyer, seller and mortgage lender. Then Ibercaja SA, a Spanish savings bank, refused her client a loan covering the 168,000-euro ($247,000) purchase price. The bank said it had concluded the client was overpaying for the property in El Escorial, near Madrid.
"The banks are coming up with a million excuses not to give loans,'' Gavin said. "They don't want to take any risks.''

Banks are refusing mortgage because the Client is overpaying for a property: Sounds like Banks are coming back to earth and follow sound pratices. At least this credit crunch created a return to normality over there. Hope the message spreads among reckless lenders throughout Europe.

Source: Bloomberg
Related: Spain as a trigger...Finland Next?

To Fall Or Not To Fall?

"Finnish insurer Tapiola said Wednesday that the growth in Finnish house and flat prices seemed to be grinding to a halt."

"Vesa Immonen, the head of Tapiola's real estate investment branch, said signs on the housing market indicated a cool-down, adding the time properties spend on the market had risen markedly."

"Tapiola sees the credit crisis that is weighing down the world's money markets keeping reference rates elevated for quite some time, narrowing households' possibilities to buy homes."

Against I would like to highlight that history has shown after peaking, prices never stabilize. We are now witnessing an inflection point which can bring prices either sharply up or down.

Global Bail out

Today, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing measures designed to address elevated pressures in short-term funding markets.

"The US dollars will be provided by the Federal Reserve to the ECB, up to $20 billion, by means of a temporary reciprocal currency arrangement (swap line)"

"By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress,'' the Fed statement said.

If I translate, "helicopter" Ben is now running full steam on its money printing press, flooding the market with liquidity. I'm not sure about the consequence of this action. After all the banks that had not taken risks and have had rigorous risk management won't be rewarded instead the reckless lenders will.

In the past 3 month, the central bankers opted for promoting "Moral hazard" in order to safeguard the system. Time will tell us if the action taken was the right one but in any case it shows how serious the situation is.

After 20 years of credit binge, one has to pay the price. Not the bankers, not the ensurers, not the small minorities of investors, instead it's the common people through higher interest rates and higher inflation.

It shows you as well the limit of a free market. Market are efficient when its participant are willing to play by the rules and with transparency. It's not the case...There are still many "skeleton in the closet". Most frightening you are wondering if they are behind the curve!

Source : ECB , Bloomberg

Swedish Price Collapse and Tapiola Group

"The Swedish E24, an online economical site told on Monday that apartments prices in Stockholm have fallen8-9 per cent in the last three months ." reported Kauppalehti.

"The stock of apartments on sale will probably not increase significantly, so average price will stay at around the same level. Do not be afraid of a price collapse." said Isa Immonen, from Tapiola group.

First I'm not surprised to see price starting to come off their historical high. Finland will follow with a high probability next year as rising stocks, lengthening of sales and plummeting affordability will dent the housing market.

Second UK prices are dropping at a pretty fast rate, at a time when we have a record low level of unemployment (Unemployment Drops to the Lowest Since 1975, reported Bloomberg). So even the best news can't keep the housing price from rising or even stabilizing them.

Last, I would like to remind that The Tapiola Group has been pretty poor in predicting either interest rates or housing price evolution. As I recall in June 2007 : "(The US) FED is More Likely to Raise than Reduce Interest Rates", as we know ,the opposite happened. Of course now they are predicting interest rates to come down to 3.5% where most economists are betting for stable 4% for 2008 if not higher if the credit crisis come down and German inflation start to bite...

Source: e24, Kauppalehti
Related: Sweden price down, Finland Next? , The great prophet of the past

Monday, 10 December 2007

Latvia, 13.7% inflation

Latvia inflation continues to climb

"Latvia's inflation continued climbing in November, reaching an annual rate of 13.7 percent, the country's statistics office announced Monday."

"It is the sixth month in a row that the consumer price index has risen in Latvia, which has the highest inflation in the 27-member European Union."

"Monthly inflation in November was 1.4 percent, led by food prices, which increased 3.4 percent, Latvian Statistics said. Bread prices alone soared 16.3 percent over the month."

Looks like investing in Bread could be a good investment. A 16% rise in a month, it's better than a mere 6% a year in real estate.

Again the ECB can do anything about that, as the Latvian government, banks, regulators had a blind eye on lending and credit standard.

The economy is now overheating and the whole country pays the price especially the poor or ones that can't hedge against inflation.
Latvia interest rates should have been much higher than the current 4% ... but remember the ECB is setting rates for the biggest economies namely Germany, France, Spain and Italy...the rest is negligible.

At the end it seems that the European economies are diverging due to inappropriate monetary policy for their economy.

I already highlighted the issue that the Baltics can have on the Finnish economy, So 2008 will be definitely an inflexion point...

Source: BusinessWeek
Related: The trigger..the Baltics?

Risks of Higher Inflation For Finland

Bank of Finland governor says pay deals risk higher inflation

"Erkki Liikanen, the governor of the Bank of Finland, said in a statement Monday that pay deals struck over the course of the year risked higher inflation."

"Wage rises above the rate of recent years pose ever greater demands on productivity growth. If productivity growth does not improve and costs accelerate, jobs will be lost," Mr Liikanen added.

Finland inflation doesn't influence much the ECB. So what to say about Liikanen comments? nothing much except a message for the Finnish company to increase their productivity otherwise competitveness will be lost.

Lots of people are retiring so the job rate will go down anyway, at least until 2015, effectively putting more pressure on capacity and prices. Immigration is helping on the margin. The growth that Finland has known over the past 2 decades is gone.

What would that mean for the residential market? a cooling down, a stabilization of prices at best.

Source: Bank of Finland, Newsroom Finland
Related: Challenging Situation

Commercial Real Estate Bubble II

Boom In Shopping Mall Construction

"A boom in the construction of shopping malls is being seen throughout Finland."

"At present there are 60 malls in the country, but the number is on the rise. Areas that are showing economic growth will see 20 large new shopping centres within the next five years. Last year, the total turnover for malls was four billion euros, and it is growing by 10% annually."

"A new mall, Revontuli, recently opened in the capital of Finnish Lapland, Rovaniemi, is the largest in Scandinavia. It is also the first mall in Finland built over a highway. Linked to the nearby Rinne shopping centre, it has some 44 000 square metres of floorspace."

Indeed it's better to build Mall than residential real estate as investors are looking for higher returns. I guess investors have committed funds in the past few years in real estate investments so this money need to get somewhere and finds home in the commercial side.

But a mall in Lapland, brings you a sentiment of sadness... or when man turn gold into lead... I would rather see some family shops than a serialization of shops (Antilla, Lindex, Halonen...) that give you the feeling that you are elsewhere than Lapland....

I think the idea was imported from the U.S. , malls allow you to stay all day in it, you can eat, shop, play etc... the next step for malls is to bring your workplace and home inside ... I have already seen some retirement house and hotel attached to malls, the question is when are we going to see a birth clinics to close the loop.

Source: YLE
Related : Commercial Bubble I

Friday, 7 December 2007

Finnish Nurses, German Train Drivers Prevent ECB Cut

"Finnish nurses and German train drivers may prevent European Central Bank President Jean-Claude Trichet from cutting interest rates next year."

"In Finland, 15,350 nurses withdrew a mass resignation on Nov. 19 after winning as much as 28 percent in wage increases over four years. Workers at state-owned liquor stores in Finland averted a strike by agreeing to a pay raise of 12.6 percent over two years."

"In Germany, Europe's largest economy, state-owned railway Deutsche Bahn AG last week reached agreement with 135,000 employees to increase their salaries by 10 percent through 2010."

"The ECB today raised its 2008 inflation forecast to about 2.5 percent from 2 percent."

While Central banks from developed countries are cutting rates, the ECB cannot as inflation has reached level not seen since the beginning of the decade and pressure of higher salaries are on the increase.

US, UK, Canada have cut interest rates as they are seeing a weakening economy due to the current credit crisis. UK, Ireland and Spain housing will, with no doubt, falter next year...

Wednesday, 5 December 2007

"lies, damned lies and statistics"

"An average person in Finland lives in a block of flats in an owner-occupied home of 78.4 m2 consisting of 3 to 4 rooms, and pays a monthly maintenance charge of EUR 2.5 per square metre for it.", reported statistics Finland

"Housing loan in Finland totals EUR 22,400, and consumer and other credits EUR 9,400 per household. Housing costs account for a quarter of households' total consumption expenditure."

According to the same agency, the average price of a dwelling is about 1,990 euro/m2 (for the whole country). So for a 78.4 m2 it brings us to an average price of 156,000 euro. I don't understand how they get this 22,400 euro housing loan?

I know that OP bank (Osuuspankki) have released lately some figures that seems to come from another planet with respect to loans burden but coming from a state agency it's a disappointment in term of disinformation. I think they should publish this data based on region not throwing an average "non sense".

As Mark Twain once pointed out: " There are three kinds of lies: lies, damned lies and statistics"

Source: housing price , loan cost

UK: Decade Worst Performance

"U.K. house prices fell for a third month in November, the worst performance in more than a decade, and consumer confidence slumped, signs that rising credit costs are hobbling growth in Europe's second-largest economy."

"The average cost of a home in Britain declined 1.1 percent to 194,895 pounds ($400,000) from a month earlier, after a 0.7 percent drop in October, a report by HBOS Plc said today. Prices last fell for three months in a row in 1995. Consumer optimism declined the most in at least three years, Nationwide Building Society said."

Will the contagion start next year for Finland?

Tuesday, 4 December 2007

Finnish Mortgage Society: Sharp Slowdown

"The Finnish Mortgage Society said Tuesday that the country's housing market had slowed down surprisingly quickly in the October-to-November period."

"It added that a slowdown would persist at least until the spring owing to a longer than expected impact of the US mortgage crisis."

Is it really surprising? interest rates and housing prices have gone up in a straight line. Affordability has sharply decreased and construction cost soars to an unsustainable level. No one should be surprised of a sudden reversal of housing prices in the next year or two.

If history serves as a guide, a correction (that has not yet started) is never as short as they seem to imply.

Builders' Share Prices And House Price Corrections

"Interestingly, in the past six months house builders' share prices have fallen by 50pc. Falls on that scale have only been seen three times in the past: in 1974, 1976 and 1992."

"Each of the three major house price corrections of the past 30 years has been preceded by a collapse in house builders' share prices."

This analysis is from the Guardian with respect to the english market.
The same can be applied to the Finnish housing market.

Let's review the share price of the major house builder in Finland:
Company : Max/Min = %drop

YIT : 27/15 = -44%
SKANSKA : 17/13 = -24%
AAP : 55/35 = -36%
NCC : 236/122 = -51%

Ramirent : 22,00/11 = -50%

Source: The telegraph

Monday, 3 December 2007

Katainen: Housing Production Will Accelerate

Jyrki Katainen is the chairman of the Finnish National Coalition Party (Kokoomus) and the current Minister of Finance of Finland.

"The temporary good times, which have existed, are simply falling behind", Katainen said to Helsingin Sanomat on Thursday.

"Katainen does not expect an actual recession, but the growth rate in the economy is far too slow in his view, to cover the costs of a welfare state."

"All measures need to be taken into use, and many more ideas need to be invented for achieving growth", he said.

"To improve the situation, the government plans to take measures to improve productivity, speed up reform in the municipal and service structure, and accelerate housing production in the Helsinki area, in order to ease the shortage of labour."

So increase supply and speed up municipalities reforms (especially concerning land planning monopoly?) will be the perfect storm for the housing market. Most probably 2009-2011 would see prices coming back to a more natural level and allows "low/average salary" labour to live and purchase properties in the Helsinki suburbs...

"There have been no new turnarounds in the economy, and factors which slow down growth have long been known." Katainen said.

Mr Katainen seems to see rougher times ahead... what was 2001? not a turn around?? right the housing market boom stabilized the economy... Then he is throwing a riddle "factors have long been known", is it the high leverage of the consumer?, the housing market correction?, the global economy overheating?, low global interest rate unsustainable?

KONE: Renting is better

"KONE announced on August 7, 2007, that it was considering the sale of its KONE Building located in Espoo, Finland."

"KONE sold the KONE Building today to Hanseatische Investment-GmbH ("Hansainvest"). "

"The selling price is EUR 35 million. KONE will stay in the building as a tenant under a long-term lease agreement."

So either KONE thinks that commercial buildings bubble is about to burst or they have urgent need to get cash as borrowing become increasingly difficult because of the liquidity crisis.

About KONE: It is the world's leading elevator and escalator companies. It provides its customers with industry-leading elevators and escalators, with innovative solutions for their maintenance and modernization.

About HANSAINVEST : Founded in 1969, HANSAINVEST Hanseatische Investment-GmbH, Hamburg, is part of the SIGNAL IDUNA Group, one of the largest German insurance and financial service providers.