Wednesday, 30 April 2008
"The stock of housing loans extended to households by MFIs amounted to EUR 63.5 billion at the end of March, with an average interest rate of 5.00%."
"The annual growth rate of the housing loan stock declined to 11.9%, down from 12.2% in February. "
"The annual growth rate of the corporate loan stock has risen clearly in recent months, accelerating to 16.1% in March, compared with 13.5% in February and 11.8% in January. "
According to the Bank of Finland, there is a clear deceleration on the housing loan front but a clear overheating on the business side, a clear sign of the end of a cycle.
Monday, 28 April 2008
"The payment problems associated with consumer credit loans and instant loans are increasing at a brisk pace in Finland.
In 2007, Finnish district courts made a record number of decisions relating to cases involving debts and other claims.
The number of such cases was more than 113,000, which was higher than ever before in the past 20 years and more. When comparing with the previous year, the growth is as much as 48 per cent.
Moreover, the figures have doubled over the past ten years.
In some experts’ view, the increasing number of problems relating to debt collection is a sign of an upcoming recession.
”It is possible that debt collection becomes more active prior to a recession period, when companies are trying to collect all the money they can before individuals with payment difficulties are driven to insolvency”, says Antero Nuotto from the Helsinki District Court. "
You really wonder how and why people are able to accumulated so much debt. Finland is behaving in completely different way compared to continental Europe where a slow down in credit has already been perceived.
You can clearly see it on residential housing, where banks have not put any brake in lending money to people for buying an asset that is clearly inflated. Why do they do that? do they think they are smarter or are they just pushing people into trouble for profiting of the situation later??
Thursday, 24 April 2008
So If people are stupid indeed they will be using the company email service to send corporate secret...
Are the people behind this law stupid (...like a fox)?
Second point, are they, as well, going to monitor emails send through google Gmail, Yahoo mail, hotmail etc...? are they going to ban employees access to those email providers from internet access?
if they really want to protect corporate secret then they will need to :
1-forbid any internet access
2-remove any cd/disk drive
3-remove any USB port
5-disallow the use of mobile phone or digital camera
6-body check each person when they finnish their work
7-check people social connections, monitor phone calls
Then maybe corporate secret won't go to the "evil" competitor.
Wednesday, 23 April 2008
Usually it's either the barbers that are acting as the "canary in the coal mine" (or parrot in some cases) or the the taxi drivers. For example, back in 2000, my barber was advising me on what to buy in the stock market, she acted as a specialist. Nowdays , she advises on housing...
Today, this role is clearly being taken over by the taxi drivers.
In 2001, prices sharply went up and we add a recession.
In 2008, prices sharply went up and what are we going to have?
Tuesday, 22 April 2008
"The outlook for the Finnish building sector still looks positive, concluded a statement by the Confederation of Finnish Construction Industries (RT)."
"RT expects the construction industry to grow by four per cent this year, even though there will be a ten per cent reduction in new housing projects."
"However, the reduction in new projects will be reflected in the figures for 2009, when the construction industry growth rate is expected to fall to 1.5 per cent."
The housing growth is something from the past or an image of that rear mirror and if you look carefully you will see reverted growth...that's the forward forecast.
The state of Finland has sold all its shares in Finnish telecommunications operator Elisa, the prime minister's office reported on Tuesday.
The Finnish state owned a 0.65 per cent slice of Elisa's share capital, which it sold for 18.1 million euros.
-22.4.2008 at 16:02 Elisa publish the interim report: share was trading down 14% at 13:76 euro
Revenue was negatively affected by 2007 revenue adjustment of mobile segment, approximately EUR 7 million. This was due to correction of 2007 revenue estimate of delayed customer billing.
This information/story, events or physical or virtuel entities represented in this article are purely fictuous any similarities with real entities is purely coincidental especially ones refering to the government- The author as well as any commentators decline any responsabilities described in this document/article.
Here is a clear message to the ECB: Follow your mandate carefully otherwise you might push government to deal with social unrest. Inflation is the first threat to the poor or the fragile one (elderly and the future poor: the unemployed).
Food price (wheat, rice) , petrol, electricity, rent are increasing at an alarming rate while at the same time wages, adjusted to inflation, are NOT following up for the vast majority. (I have to say some earn already a lot and give themselves generous rise on behalf of the citizen : see thin and fat article )
The problem can already be seen in Finland and the U.S. (see this article).
"Increasing numbers of people in the Helsinki region and other areas have been queueing up for free food."
"The need is considerable in the Helsinki region, but in recent times we have been contacted from other parts of the country, where there are reports of a need", Hursti, a private volunteer who distributes food in Helsinki, says.
Monday, 21 April 2008
"The pace of activity in the housing market has also normalised and households have become more cautious."
"The number of unsold new homes has increased and construction companies have cut down their production."
"Residential investment will decrease markedly this year."
"In Finland the rise in prices has been more moderate than, say, in the other Nordic countries, but a calmer period of a few years seems natural after an uptrend lasting several years."
Clearly, if the credit and confidence crisis continue, its impact are beyond any crisis seen in the past 30 years thus making the last recession as shallow one. After all, the last recession was the trigger for housing price acceleration as interest rates were mistakenly pushed too low.
"Prices have reached as high as 15,000 euros for a hectare of land."
Friday, 18 April 2008
Recent wage dynamics in conjuncture with elevated and persistent energy and food price pressures have increased the risk of a prolonged period of intolerably high inflation,'' Weber said in a speech today in Frankfurt. ``We will have to continuously monitor closely all incoming data and evaluate whether the current level of interest rates in fact ensures'' price stability.
Weber is the second ECB policy maker this week to suggest that the bank's next step is more likely to be a rate increase than a cut. Surging food and energy prices pushed euro-region inflation to 3.6 percent in March, more than initially estimated and the fastest pace in almost 16 years, the European Union's statistics office said yesterday. "
Thursday, 17 April 2008
Scandinavian property markets have enjoyed explosive growth over the last decade. Since 1995, property prices have climbed by an average of 12% in Denmark and by nearly 8% (per year) in Finland and Sweden.
Between 1995 and 2007, prices soared by nearly 300% in Denmark and by approximately 150% in Sweden and Finland. This trend coincided with a steady increase in residential investment which accelerated in tandem with the economic upturn that started showing through from 2004 onwards.
As a result, the construction sector’s contribution to economic growth in Scandinavia – both directly, in terms of increased demand via residential investment, and indirectly, though higher employment – has been massive, especially since 2004.
Furthermore, it would appear that what will probably prove to be a hard landing for the Scandinavian property market is already underway. Structural indicators are in negative territory, in contrast to the situation in 2000-2002 when the economic slowdown was short lived.
Scandinavian households had substantial recourse to credit in order to buy their own homes. Apart from the downward blip between 2001 and 2002, growth rates in lending to households have exceeded 10% over the last ten years. The trend was underpinned by historically low levels of interest rates in 2003/2005.
Household indebtedness topped the levels recorded before the late 1980s crisis: almost 250% of gross disposable income in Denmark and 150% in Sweden. Borrowing on this scale now looks unsustainable. As a result of monetary tightening – the process took place somewhat late in the day: i.e. in 2005 - interest charges rose (rates on home loans stood at 5% in most Scandinavian countries in January 2008 vs. 3% to 3.50% in 2005).
This not only increased the cost of new loans but also pushed up the cost of honouring existing debts as an extremely high percentage of home loans had been taken out at variable rates: 40% in, Sweden and Denmark and 90% in Finland.
This problem has recently been compounded by the current financial crisis which has led to an increase in bank financing costs and, by the same token, to tougher lending conditions.
A close watch needs to be kept on the indicator that measures growth in home loans. This indicator rose to an all-time high in the first quarter of 2006 but has since been retreating slowly. On a short term view, a more substantial loss of momentum is to be expected.
Residential construction market trends leave no doubt that the housing market has started to run out of steam. Housing starts (compound 12-month figures) fell by 30% and 37% yoy respectively in Q2 and Q3 in Denmark, by 9% in Q2 in Finland and by 34% in Q4 in Sweden.
The end of government measures to support the construction industry in these countries does much to explain the sharp downward swing.
That said, the underlying trend is equally discouraging. The reversal of trend is well underway in Denmark and Finland. The movement is particularly palpable in Denmark where the tide has been turning since the second quarter of 2007: prices tumbled by 5.1% and 8.7% respectively in Q2 and Q3.
Although prices are still rising in Finland, the pace slowed from 7% to 5% yoy between the first and fourth quarters of 2007.
The property market recession in prospect will have significant implications for Scandinavian economies as a whole. Firstly, the percentage of GDP accounted for by residential investment has risen sharply since the mid-1990s, notably in Finland and in Denmark.
This means that the contraction of household residential investment will have a direct negative impact on growth. The signs have already started filtering though: in the second half of 2007, residential investment fell by 1.8% and 1% respectively in Denmark and Finland. From this year onwards, all three countries are likely to be affected.
Secondly, the impact on the job market will be considerable. In Denmark, the percentage of total employment accounted for by the construction sector rose from 4.8% to 5.9% between 1996 and
2006. Moreover, this sector was responsible for almost 20% of job creations over the same period. The trend was similar in Sweden and Finland: the construction sector accounted for more than 15% of job creations between 1996 and 2006).
As Denmark’s property market is the most vulnerable, the correction in this country is likely to be the most severe. Finland and, to an even greater extent, Sweden are less at risk but are nonetheless on course for a property market recession.
Tuesday, 15 April 2008
Wages climbed almost as steeply in private health care and social services (10.5 percent) and financial services (10.3 percent). Even in sectors where growth was moderate, there was still considerable improvement in paycheques. Growth was the slowest in private-sector educational services, where pay was up by 6.2 percent."
Source: Statistic Finland
Monday, 14 April 2008
"Finland's inflation rate rose to 3.9 per cent in March, Statistics Finland reported in a statement on Monday. The inflation rate is increasing fast, as February's year-on-year figure for consumer price change was 3.7 per cent."
"Inflation was pushed up most in the year by risen prices of housing. The rise was due to higher prices of energy, risen housing loan interest rates and real estate prices as well as rent increases. Inflation was also pushed up by increases in the prices of food, automotive fuels, restaurant and café services and retail prices of alcoholic beverages from the year before."
Back in September, when i started this blog,I warned that prices were going out of control. Finnish Economist, politicians and banks didn't really think so when reading them through the news or statements. Those people are clearly behind the curve and were not able to predict the fact that inflation is now threatening the stability of our economy. The first casualties will be hard assets such as housing.
Indeed, high inflation if persistent would mean higher interest rates at some point while salary are pressured lower (something never experienced before).
You didn't have to be a genius to see that letting interest too low has created a period of unusually cheap credit that is now affecting the real economy globally through higher prices in any commodities : food, oil etc... in fact anything (except electronics , cars? maybe not as it's relatively expensive here in Finland)
Unfortunately for Finland, the ECB is targeting Germany, France and Italy inflation. Thus letting Finland on its own and most probably pushing it into a prolonged period of sluggish growth. The impact is going to be felt socially by raising tension toward immigrants, first casualties in a slowdown. It will be followed by loss of competitiveness if second round effect materialize plunging even deeper the slump.
Housing price were adjusted in 2003-2004 with the idea that we will live in a prolonged period of low interest rates. Imminent economist in Finland stamped that theory. Unfortunately it's all wrong. Globalization side effects were not taken into account in setting up this "perfect" scenario. So prices are indeed between 10% to 40% overvalued. And as the readers pointed out in the survey (on the right of the blog), prices could fall by 30% by 2010 which is getting more realistic as time goes.
The dream is now turning into a nightmare.
Wednesday, 9 April 2008
"Home prices had declined more steeply than anticipated, and the weakening housing market, combined with a softening in labor markets, appeared to be weighing on consumer sentiment.
Businesses also were seen as becoming more pessimistic and cautious, despite a strong foreign demand for U.S. goods.
Strains in financial markets had increased, portending a possible further tightening in the availability of credit to households and businesses.
Against this backdrop, many participants thought some contraction in economic activity in the first half of 2008 now appeared likely.
The economy was expected to begin to recover in the second half of the year, supported by recent monetary policy easing and fiscal stimulus.
Accommodative monetary policy and a recovery in financial markets along with an abatement of the downdraft in housing activity were expected to help foster a further pickup in economic growth in 2009.
However, considerable uncertainty surrounded this forecast, and some participants expressed concern that falling house prices and stresses in financial markets could lead to a more severe and protracted downturn in activity than currently anticipated."
So all are betting for a better second half although as time and event unfold, this view is downgraded each time. That remind me, the 2001 period when each market participants preaching that next half would be better. Ultimately one got it right 2 years after...
So the risk is massive for a recession and for a bad one in the U.S. The next question is about contagion, how much will it impact the rest of the world and in particular Europe.
Here is what they have to say Europe in their minute :
"In the major advanced foreign economies, the rate of growth of real gross domestic product (GDP) generally declined in the fourth quarter. The source of the slowdown varied substantially across economies. In the euro area and in the United Kingdom, output was restrained by a softening in domestic demand."
That is true for Finland that has seen its GDP fall from 6.2% to 3.4%, almost halving it in a year. Although one has to recognize that this is still a very good one. Would that GDP continue to deteriorate or would it stabilize at around this level? it's all depending on the consumer...
Tuesday, 8 April 2008
"U.K. house prices dropped by the most since 1992 in March as a global credit squeeze forced banks to roll back mortgage lending, adding to the case for a Bank of England interest-rate cut this week, a report by HBOS Plc showed."
"The average cost of a home in Britain fell 2.5 percent to 191,556 pounds (240.000 EUR) from February, the U.K.'s biggest mortgage lender said in a statement on the Regulatory News Service today."
As highlighted multiple times throughout this blog, the housing correction will come from the west and like a domino will ultimately reach the east with a time lag. (First the U.S. then U.K , Ireland and Spain etc...)
As the ECB had highlighted many time, Europe trade is higher and more important with U.K. then the U.S. So while the U.S is entering a recession, the ECB was not yet that alarmed but if the U.K does really enter a recession then "Houston, we have a problem"...
Saturday, 5 April 2008
"Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world's richest country faces economic crisis."
"Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s. "
That's pretty surprising, isn't it? Maybe, you have been watching too much the BBC "smart-propaganda" channel and need urgently different sources of information...
Indeed the internet is not only a great tool for finding information, participating in open discussions but it provides you different way of thinking, allows you to be more critical. Let's just hope that organization such as yahoo or Google don't turn up like BBC (which was probably a model when first born then later was used as a pure political tool (we clearly see that with the way they report any news about Zimbabwe, China etc...))
This article although slightly shocking for some, can be clearly related indirectly to the Housing market. The information you are getting through different channels can be wrong or distorted so you need to be more critical and not absorb blindly any information. That's the point I try to make in this article.
Note: this is not an anti American article, I don't fall in those cliché; I am not. There is good and bad in all nation and categorizing "Black and White" certain communities and countries would be a mistake.
Some Finnish media are clearly promoting discrimination by unfairly targeting the minorities such as Romanians or Somalians. Let's just remind that they represent a very small portion of the total immigrant... This media participate in the process of shaping incorrectly the mindset of the most fragile one as well as distorting the view of the most educated one. There is nothing that can be done about it but I encourage people to have different view and have access to different source of information: "Knowledge is Power"
I'm maybe utopic into believing that one day we will be living in societies when all people are equal and where discrimination will disappear but at least I'm really hoping that history taught us lessons and in time of crisis people come together to solve it instead of being against each other...
Source: Food stamps
Friday, 4 April 2008
"The numbers have been awful; even in the last few days we've had manufacturing at a five-year low,'' said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. "Maybe Ahern is leaving at the right time."
"Ahern, 56, announced his resignation at a press conference yesterday, bowing to pressure from lawmakers over investigations into gifts and cash he received in the 1990s. "
Thursday, 3 April 2008
"Finnish business daily Kauppalehti reported Thursday that the Bank of Finland might have to bail out Icelandic banks should they run into dire straits."
"According to the paper, Nordic central banks agreed four years ago to guarantee the stability of the region's banking system by bailing out banks that operated in at least two Nordic countries."
"The agreement was struck before any of the Icelandic banks operated in Finland. Credit rating agency Fitch recently downgraded Glitnir, Kaupthing and Landsbanki, all with operations in Finland."
Is nothern rocking? well when there are talks about bail out it's not a good sign for the nordic region as it is just a preparation for disturbing turbulences right at the doors... at the moment they are just banging, Erkki & co is still strong enough to hold the doors, but for how long??
So the Finnish tax payers might be have to participate into rescuing greedy, uncompetent icelandic bankers. I have no doubt that those CEO or investors that engineer this investment bubble have now their pocket full of money and have no worries wahtsoever if things collapse as they already backed their position... That's when Socialism come to the rescue of Capitalism : when things goes well the top rich get fattier and when things goes bad the lower income or the bottom 90% have to work hard to rescue the system....
We are witnessing the worst financial crisis that current and old generation has ever seen and yet the Finnish newpapers, web site , thinktank and bankers talk up the "Decoupling theory".
This theory state that although the US might fall into a recession, the rest of the world i.e emerging market, will be strong enough to keep intact the world economical growth.
The architecture of the current
It could be that this financial
"The highly-indebted banks have been found it hard to borrow on jittery credit markets over fears that they could default on debt. "
"The ratings agencies have expressed concern that Iceland may have to support the country's banks to avert a possible financial crisis. "
"The increase is not big enough to warrant alarm, according to Pekka Haenninen, an actuary at Statistics Finland, the paper said. The biggest increase was for trading companies, Kauppalehti said."
"Personal bankruptcies increased to 2099 from 1532, according to the newspaper, putting their increase at 37 percent. "
It's very interesting to see how fast censure can bite...
Today I was reading an article on YLE that was reflecting the impression I had "on the street" about immigration ,employement and unemployment.
Finland is asking for more foreigners to come, some have been here many years, speak finnish and yet can't find job. According to this article (which has been censured in the meantime), it says that the unemployment of foreigners is about 3 time higher then the average .
They took an example of an immigrant whose name sound foreign which has a degree in information technology and still the only work that he had found is in cleaning...
Why I talk about it today, it's not because of what the article is saying, as it's, i think, known to everybody except to the politicians (that do nothing about it) but instead it's about the fact that YLE has removed the article.
Were they under pressure? political pressure...well Censorship bites is even a greater sign of problem...hide the problem and it will become 10 fold worse...
Free press?, you wonder...
Wednesday, 2 April 2008
"Housing investment grew rapidly for several years before declining slightly during the course of 2007.
Indicator data suggests housing investment will remain weak in the first half of 2008.
The forecast for the next few years is for growth in housing investment to be more or less at a standstill, with interest rates and construction costs higher than the average for recent years and a continuing shortage of building land and skilled labour."
Are they kidding? shortage of building land??? Mister Housing Minister, where are the land reform you promised. Let's remind that he was warned about it by the OCDE late 2003.
Now on top of the OCDE, Mr Liikanen is indirectly suggesting that you are a little bit incompetent since you badly handle the building permit process in a country where land is not scarce at all. So Wake up and do you home work....
"If future wage demands and companies’ pricing decisions are based on expectations of a continued rapid rise in costs and prices, the level of costs in the domestic economy could gradually rise so high that restoration of the cost-competitivenessof Finnish production will require a long and painful process of adjustment."
a 1990 repeat? a
depression recession needed to allow for reforms and readjustment..after all it create a better administration and economical giants...and reduces the greed
"The contraction of the working-age population from 2010 onwards will begin to permanently compromise the general government balance."
This time won't be like 1990's housing recession for a simple reason at that time the baby boomer were reaching the golden age and were still supporting the housing market.
Now they all retire, so they won't be around to kick in and boost the housing market as it did in 1996. I think most probably we are going to have a situation similar to Japan or Germany (hit early by older population) where house price drift slowly but surely lower and lower, never bottoming out. At least it will repeal the speculators . The housing market will normalize in the next 30 years or so losing 40%-60% of its value (drop mainly due to a 2% inflation and no growth or very little)
"This was because of the increase in interest rates and housing prices. In the immediate years ahead, CPI inflation is forecast to slow more quickly than HICP inflation. This is because of a forecast easing in the pace of housing price rises and an assumed gradual reduction in interest rates from their present level."
So Bank of Finland is predicting
a slump an ease of the housing market, at least now for house buyer time is on your side, you can choose for quality versus crap cheap one...
Tuesday, 1 April 2008
"Credit market turmoil poses the most severe crisis for banks in 30 years, surpassing Black Monday in 1987, the Asia currency crisis and the burst of the dot-com bubble, Morgan Stanley and Oliver Wyman said in a joint report."
And still people, media, Finnish Bank, Politicians and co are thinking that the finnish housing market won't be affected... are they living in the Moon (Mo-r-ons)?