Finland has shown a single digit growth in the past few years, believe it or not. Those figures are calculated on prices for the whole country thus distorting the reality. As people might not know, the economical situation of the Lapland area, and east side of Finland is not in a great shape. The reality is that in the greater Helsinki area and in big cities , prices have grown in a double digit level in the same way as UK, Spain or France.
But the housing market in Finland is different to France, UK or Ireland but in fact tend to be more similar to Spain. Why? because housing loans granted by banks in Finland has been in 98% of the case settle on variable rates based on a 12 month Euribor...
Variable rate mortgage is a great tool for bankers to bring affordability down when interest rates are unusually low. This has happened during the 2002-2005 period. Now most household have seen their mortgage payment almost double.
That's clear that housing affordability has plummeted from year 2000 as housing price have kept on rising and interest rates came back to their more natural level.
According to the ECB the "Crude" affordability is at a decade low. The "crude" index is the ratio of households’ nominal disposable income to the residential property price index.
So the "interest rate adjusted" affordability has been mainly pushed higher in 2002-2005 due to low interest rates but since then plummeted to reach as well a decade low.
So affordability is at a decade low, can this situation persists? This blogs is all about that to denounce this situation and warn potential buyers to be cautious as we are on thin ice here. The housing market is vulnerable to any unforeseen shock albeit political, or economical ones.
Then there is this irrational supply of housing flooding everyday the net. Sellers taking buyer for dumb, and first time buyers behaving in an irrational way (by buying!) due to stress or social pressure. Here are some examples:
Most dramatic some landlord are proposing low or free rent on exchange of services (read that as sex services.)