Wednesday, 30 April 2008

Finnish Real Estate Plunging?

"The growth in the prices of old apartments has calmed down and even dropped slightly in some areas, the union of real estate agents said in a statement Wednesday.

According to the union the sales times of apartments have grown longer and at the beginning of the year were on average 65 days.

Buyers are now more careful due to rising interest rates, economic uncertainties and concerns about the future."

Buyers , if there are still left, are concerned about house price not about interest rates. Let me remind you that interest rates a 4% , is still a low rate when you observe the inflation pressure comming from all directions : food rise, oil rise, salary rise in emerging market, currency appreciation in emerging market.

People will be fool to think that interest rates will go back to the 2% reached in 2003. This is something from the past. At best interest rates will fall to 3% in 2009 if you have a global economical deceleration with UK, US , Spain, Ireland and Italy falling into recession in 2008 followed by Finland, Sweden, Danmark in 2009...then maybe rate will fall to 3% .

Now what would that mean to the housing market? well people will be better off having cash instead of an illiquid asset during recession time. Price will come down with a risk of a sharp downturn if the recession transforms itself into a depression monster. After it will be known sometime in the second half, during that time we will see if US and UK will be plunging in their worst recession ever seen by the current generation.

Bleak or black, the outlook could turn green or red, it's all depends on how much greed has been poured in the past 5 years... This time the swan might turn into the ugly duck...

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