A- On the Housing Market:
I think it is clear for all that the housing market peaked in 2008 and started its long and slow correction since then. Statistically based on the data provided by Statistics Finland and on the two previous downturn, it takes about four years for the adjustment to end. This time won't be an exception amid the fact that we are witnessing the worst slump since the second world war.
But let's look at what Bank of Finland has to say:
"Housing and property prices started to decline in 2008. Growth in the stock of housing loans has slowed. Office property prices will also probably decline. Real estate investment trusts’ share prices fell in the second half of 2008."
"According to preliminary data from Statistics Finland, nominal prices of old flats and row houses peaked in the second quarter of 2008, after which they fell by nearly 5% by the fourth quarter of 2008."
"The decline in prices has so far been modest, compared to the persistent price rises of previous years. If nominal housing prices are converted to real prices, using Statistics Finland’s cost-of-living index, housing prices are approximately as high as in the housing market upswing of the late 1980s."
B- On the Rent:
"Developments in rents are mixed. According to a recent survey by the Finnish Association of Building Owners and Construction Clients, the rents on small dwellings are expected to rise further, whereas in many cities, the supply of large rented dwellings exceeds demand."
So rent for large dwelling might decrease since there is a supply glut and it could be historical... A troubling sign of the deflation at work.
In Helsinki region the supply of small dwelling are shooting up as well, as many unsold flat are coming later in 2009, and in 2010.
At the same time, the number of student in Helsinki region is declining and should the trend be confirmed next year it will certainly put further pressure on rent.
In addition, unemployment especially for the young will deteriorate further thus the internal migration toward the Helsinki region from different region should slow drastically (this point could be checked later on based on data from Statistics Finland)
On the Magical Visible Hand of the Government:
"The supplementary budget presented by the Government to Parliament includes measures that will stimulate construction.
In 2009 and 2010, loans granted for the construction of rental flats will be supported with an interest subsidy and a deficiency guarantee.
In addition, subsidies will be granted for redevelopment projects on residential buildings initiated between the start of February and end of December 2009"
On the one hand the government want to put a cap on unemployment figures by stimulating construction on the rental market but on the other hand the risk to put even more pressure on the rental market (since the supply will increase) will increase further.
C- A Technical Analysis: The tennis ball and the dolphin
I cannot produce an article about statistics without providing my own infamous technical analysis.
So let's try to figure out what is the equilibrium of the market but first let's imagine a tennis ball falling in the middle of one the millions lake in Finland. What would happen?
1-First the tennis ball cannot stay up in the air...'cause law of gravitation.
2-So the ball fall and hit the surface of the lake. The Kinetic energy or the energy of motion will push it through the surface.
3-Once inside the lake the ball will emerge up...the Archimedes law will be in action.
4-the ball will finally stabilise at the surface until another force push it up (a pike or a dolphin from the lake?)