The last uprise was expected as discussed in the last blog article on the previous housing price release see link , so it was clearly expected to have such a rise and was in fact necessary to remove any doubt on the fact that we are clearly experiencing a bubble.
You don't have to be a genius to understand that the Finnish housing market is at a very critical level.
Heuu, about genius, is there one in the room?
“It appears that consumer faith and confidence in the economy has been channelled into the housing market”, says Anssi Rantala, head economist of the OP-Pohjola Group.Had they not put his title, I would have guessed he would be working for the banking industry.
Rantala does not believe that the prices will continue to rise this year as sharply as at the end of 2009, especially in a situation in which unemployment is expected to continue to grow.
“Housing construction will start to recover gradually, and interest rates will rise. Another reason why the increase cannot continue at such a high rate is that people’s ability, and desire, to pay are limited”, Rantala says.
I need to chat with him...let me take my mobile phone .... "tut tut tut..."
"Mr Rantala?"Apparently, it didn't like to debate... back to interest rates, when they rise, it simply mean that inflation become a threat (i.e salary rise, price pressure increase, and the economy is back to growth, etc...). I don't believe a second that such event will occur end of this year...on the contrary.
"This is HousingFinland on the phone, from the Housing bubble Blog"
"Coming back to your latest media comment, I would like to remind that historically speaking, when interest rates rise so do housing price... and instrumentally the economy"
"Don't you think that your arguments, the one you put forward in HS are flawed?"
"I beg your pardon?"
"bip bip bip..."
Now it doesn't mean that there are not cause that explain why the Finnish housing market is distorted...As I said earlier see link , the Finnish housing mortgage market is based on variable interest rates for an astonishing 90% of it.
Moreover Interest rates will stay low simply because the economy will resume shrinking, maybe end of this year and next year (maybe the next and the next). Current growth is based on borrowing future wealth...obviously there is a limit to that (see Spain, Greece). So stimulus and monetary effect will fade and the economy will resume its downward spiral as its foundation and its banking system is not sound.
Indeed, there is a price to pay for having allowed an economy to grow for about 20 years on ever increasing and ballooning debt level, failing regulation and greed- at some point, you reach the breaking point, and we have reached it.
For sure, interest rates will rise but not yet maybe in 4 (10?) years? when the deflation threat become smaller than the inflationnary/hyper inflationnary threat.
In addition, historically speaking, a massive correction should occur from both stock market and housing market (strangely, every 20 years, the economy transform itself for good or worse).
If one is hesitating whether or not to buy, it should ask itself: "is it safe to buy at an historical peak, a level even greater than the one witnessed during the 1990 bubble (inflation ajusted)?"
Maybe it will be worth to make a comparison between the Nasdaq bubble when euphoria took over all common senses and where banks advised private customers to invest in the stock market , even pushing them to borrow for buying stock... let's see the chart:
legal note: whatever it is said in this article is not of the responsability of the author , any reference to any entities may be accidental. Anything said above is not true and may be removed at any stage, at anytime (you like it or not) - the article above is meant for entertainment purpose and only targetted to trigger a smile or two...