"Consumers' confidence in the economy weakened clearly in October. The consumer confidence indicator stood at -0.2 in October, having been 8.1 in September and 8.7 in August. Confidence in the economy was also clearly weaker when compared with one year ago and with the long-term average."
"In October consumers did not consider the time at all favourable for making major purchases or raising a loan, and their plans for doing so decreased. Correspondingly, saving was considered especially worthwhile. Consumers predicted a roughly similar inflation rate for the next 12 months in October as in September." Statistics Finland
So Clearly we have level not seen since 1993... I suppose it's only the beginning, as we have not seen the worse. People are worrying amid a still begnin economical environment in Finland at a time when unemployment is still low.
From 2009 onward, we will clearly enter in very difficult waters. Unemployement will increase as weak or highly undebted company will go belly up. Financing cost will be higher, putting a break in expansion or making it very risky business.
So 2009 will be recessionary and could see a drop of more than 50% of housing sales.
One proof is one of the component of the consumer confidence, that says "Favourable time to raise a loan", and the answer is -47.1, which is a record low since 1995 and most probably approaching the 1992 real estate crash levels.
The strange thing, is in 1990 we had a finnish banking crisis...today we have a global banking crisis where all banks, the healthy or the sounds one, are affected directly or indirectly (cost of financing, stock market price, business prospect etc.... etc...)
But there is hope that Finland will manage through this crisis, without large damages - at least on the social front. The growth will be sluggish, but there will still be growth although not in all sectors, and for protracted period of time.
Finland has entered this crisis, somehow better prepared, compared to its Easter European peer. Finland doesn't have a deficit, therefore can ramp up public spending and it has already done so.
Finland is in the European Union, therefore shielded of sharp currency fluctuation with its european partner (although lately the Euro started to weaken agains almost all non european currencies -dollar, yen etc...)...the biggest difference is that they don't have to rise the interest rates in order to defend the currency as it was then in 1990 and as it is currently witnessed in Denmark, Hungary or earlier in Iceland....on the contrary, interest rates are going down and will go down next week when the ECB meets.
All in all, bank will lend less in the year to come at a higher margin and will require higher deposits for housing purchase. It clearly mean that the number of buyer will shrink if not disappear, especially if the economical situation deteriorate. The point here to make is that housing price will have to readjust to the new reality. By how much? About a year ago, I forecasted a 20-30% by 2010-2012. At that time I though it will be the maximum...now I see it as the minimum. Time have changed, so has the world...
PS: Back in February, I put forward 3 scenarios (Consumer Confidence Analysis Feb 2008)...it seems that the worse case scenario was realized a little bit earlier than I thought... :
3- The consumer confidence is on free fall, going much lower than the 2001 mild recession. Housing doesn't support any more economic growth instead become a drag. U.S. can't avert a recession and the Fed is struggling to stabilize the economy. It will take 3 years to start seeing good or near potential growth, it's a L shape recovery. Asia recouple with the economical issues seen in the US and Europe
To be compared with today figure ...