Friday, 6 November 2009

The ECB, The Government and the Donkey

…in the euro area, there is evidence that the credit quality of banks’ loan books has deteriorated on account of intensifying financial distress in the household and corporate sectors.

Banks could be getting over the valuation losses they have suffered on their securities holdings; however, the rapid increase in loan loss provisions suggests that a renewed wave of write-downs on euro area banks’ assets may be imminent, with ensuing capital reductions”. by Lorenzo Bini Smaghi, Member of the Executive Board of the ECB, Florence, 16 October 20
The first ECB warning shot...I suppose the "economical optmimism" period is about to be over in about 6-12 months and then we will be resuming the market correct in almost all asset types : stock market & Housing.

With regard to Housing, the media did a pretty good job at foolling the "last foolish"...spreading that the recovery is on its way and that the housing market was recovering...indeed it will temporarly, thanks to the "last foolish" and helped by generously blind banks (who will be waiting for the "last foolish", in the dark, round the corner, like a "bad dealer" providing the addictive "credit shot"...)

On 30 of October, Statistics Finland has published the Quartely housing price trend that has shown growth due partly by record low interest rates, no inflation and our "last -poor trapped- foolish".

As I said previously we will experience a "double top", troubling sign that happen at the end of a bubble (check the Nasdaa or OMX-H in 2000, or the petrole price in 2008)...after that, usually the fall is pretty sharp and last about a year or two.

Now what will trigger that, nobody knows ... in the meantime the government is borrowing as fast as it can in order to have a cushion (and avoid raising tax too early - that is, to ensure the current government is re-elected) in the next few years to come.


Andrew said...

I notice that i was wrong about the price of chicken. from about 2008 it rose from 1.89 to 2.25 at S market but is now 1.19 on special for november!

Elsewhere though a seemingly reliable poster i know says that houses in parts of the north of england are past the 2007 peak even if flats are still down. So it appears you now have norway sweden and even finland and parts of the uk with price pressures for housing

Anonymous said...

Regarding the UK, one upward pressure is that people are not willing to sell.

"the National Association of Estate Agents said five buyers are chasing every property at present."

Look at this very down beat article entitled "More house price falls forecast" at

"island Crow"

Andrew said...

Island Crow

I dont see a downbeat article. I see an article confirming what i was told about price rises. over 3% this year followed by a good chance of 6% fall next year followed by 5% rise in the following year and after years of rises.

The glut of buyers and absense of properties in the uk also fits my own data for Helsinki region own home houses which are highly sought after and not much coming on the market - after all who wants to pay fees almost amounting to what many people pay in rent to live in a rivatalo? I find these fees to be a very off putting cost of buying these properties and i cannot see i would ever buy one.

HousingFinland said...

Let's not compare the UK situation with the Finnish situation as there are so different in so many aspects:

- Limited supply of land
- High amount of immigration (especially from Asia)
- Higher fertility
- Retirement issues difference (age pyramid)

- Own monetary policy
- anglo saxon attitude i.e real free market

Now as regard to asset price surge in the year to come, I think you are still modeling your view on what has happened in the past 50 years... however today and in the next 20 years to come, it will be completely different, in the sense a Japanese or German scenario for housing seem more and more probable.

I would come in the next few days with the new article (I still have to find evidences and data) with regard to asset price after a financial crisis. The idea behind is that the economical world and the asset price evolution change radically....

Andrew said...

I dont necessarily see a surge in prices. But while rates are low it seems it will create price pressures for everything. A price pressure could just mean things dont sink