Friday, 24 October 2008

Housing Permit, 1990 replay?


"In January to August 2008, new building permits were granted for a total of 34 million cubic metres, which is 13 per cent less than in the corresponding period of the year before.

The cubic volume of residential building permits decreased by just under one-fifth and that of commercial and office building permits by one-fourth from January-August of the year before. Cubic volumes went down also in the other building types apart from public service buildings
." Said Statistics Finland.

The building permit is dropping as fast as the stock market. One could say what is not falling? from confidence to stock market, all indicators are showing a fast, unseen, untested, undocumented and unpredictable deterioration of local and global economy.

One has to notice that the government has already taken action as if we were already in recession, trying to shift job losses from private construction sectors to the public one, with a 45% growth in public sector building. Indeed the tax money is here to smoothen the construction sector cycle. I would argue that, instead, they should focus on more forward looking investment ...

The gloomy view is reflected in the small and medium size enterprise :

"The Federation of Finnish Enterprises said in a statement Wednesday that its small and medium-sized enterprise (SME) outlook indicator had dropped to -12 points from +6 points returned by its previous poll, carried out in August.

Harri Hietala, an economist at the lobby, said the last time the SME indicator was below nil was during the early 1990s recession
."

I think policy makers had a chance to solve the issues back in 2000 -2003, in order to cap the household debt burden, lower the bank leverage, slow down a crazy housing market and put a break in stock market speculation... The contrary happenned and today we see the results...

7 comments:

Eric said...

This will make life a little tougher for retail borrowers in Denmark

http://www.bloomberg.com/apps/news?pid=20601068&sid=anN0rDdCtFC8&refer=home

Andrew said...

whats going on guys? just heard volatility in East European currencies in baltics very high.....anybody give an overview please?

EEK (Estonian Kroon)
HRK (Croatian Kuna)
LTL ( Lithuanian Litas)
LVL (Latvian Lats)
RON (Romanian Leu

Rui said...

The amount of total housing sales has not decrease too much, only 10% for Sept compare with previous year Sept.


If we see 50% decrease in sales, then we can called it bubble ...

https://www.op.fi/eng?cid=160943455&srcpl=3

HousingFinland said...

Hi Andrew,

I have been quite busy lately so no much time to answer or even keep up updating the site. So the comments are more than welcome in such period.

Regarding the currencies, i think somehow it's link to both deleveraging and risk aversion.

Banks, pension fund are retrieving asset in most assets they have in eastern country, there is almost equivalent of a capital outflow...investment have almost frozen due to lack of capital and risk aversion is sky rocketting.

This directly impact the currencies.

You can clearly see it with the euro and the yen. Stock markets are falling and the yen is rising sharply as japanese banks and fund are selling stocks or other assets back to Japan ...to the yen..thus making the euro plummeting against the yen.

Now coming back to the baltics or estearn european country, indeed they is a clear possibility that will fall into a depression in the month ahead...quite scary to be franck. Now I'm just hoping that political stability will not be jeopardized, that's the biggest risk...

HousingFinland said...

Rui,

Is that a joke?

The big impact in the real estate and stock market clearly started in september.

OP, which is a bank and own a real estate branch, will misinform the people that do not dare to find out the correct information.

I'm pretty sure that banks in 2000 were pushing people to buy stock...and most probably in 1990, they were pushing to buy houses...

let's give you the information...I will publish an article regarding the consumer confidence and the relationship with real estate...

by the way look at the YIT share price...it tells you how the real estate market health...

But no panic, you lose only if you sell...so sometime you have to hold on about 1 or 2 decade to break even and see a profit..

Andrew said...

Maybe these countries will be greatful to turn eastwards.......if they do that voluntarily it is hard to see the west coming up with a valid reason to create ww3. It all depends on what the powers that be want to happen. So far we see the IMF bailing out Ukraine Hungary? Can they afford to bailout the whole world? Seems unlikely. Even so i find it hard to believe that nobody saw all this crap coming and that nobody just sat there waiting for it to happen for some purpose. the storm is just too perfect to be true. We can of course turn to the cock up theory.......but as British Economist Fred Harrison points out, inside Citi banks own records are all the transaction histories for the last 120 years showing boom bust every 18 years. That they could not know they were going to go thru a bust now to lose 10's of billions seems hard to believe. Particularly when some of the IB's go regulatory approval to lever to 1:40 in about 2002. Maybe it was do or die for the USA?

HousingFinland said...

Clearly the leveraging is a massive issue.

a lot of banks have 1:30 level. so if their total asset price goes down by 4%, they are insolvent. I suppose that's what has happenned for some banks or would have happened if the central banks didn't intervene... and that's why you saw, as well, government aligning tax payer money to recapitalize banks or take the bad assets from their balance sheets.

I'm in the camp, that it was too big not to have been noticed by economist or big industrialized government. Amator economist were warning that for many years. In 2005 Warren Buffet was warning the Credit Derivative were "weapon of Mass destruction" in his own words..nobody listened or were the risks calculated.

At the end, it's the emerging market (China, India and Russia) that will pay due their imature economical system.
Incredibly enough, these three were thought to be the next dominant power, only about 6 month ago... the world is changing and fast...

Of course, the ultimate risk is to have government failure or going bankrupt...not sure if it's possible...then Who would pay the police forces, the army? etc...and it's during those time that big turbulences arise... hope it won't happen... let's not get too pessimistic ;->