Monday, 28 June 2010

Finnish Beauty Competition

I think everyone has come recently with an housing advertisement that has a abherent pricethat is totally disconnected from reality but yet professional real estate agents and/or banks are often behind the sale. So I thought it would be good to highlight those cases for fun - A beauty prize could be given on a monthly basis . Such examples can be found easely on sites like Etuovi or oikotie

The charateristics should demonstrate the current Finnish Housing Bubble:

- Physical aspects: "kissable lips and inflated bottocks"
For example , a flat from an old buiding, cheap material or construction techniques. It could also expose the discrepancy between the asset and the proposed value. etc...

- Geospatial aspects: "walking on the sea"
For example, flats that are about 100 m or less than a rail line or highway. Some house that are build on potentially dangerous location demonstration poor health, or land conditions (noise, high traffic, mould, radiactivity in some cases, etc...)

- Financial and Marketing aspects: "in the kingdom of the blind, the one-eyed man is king"
For example, financial montage - a current and massively used technique from contruction builders/banks to attracts buyers bypassing the unfamous "vigilance" of the regulators. Or Also, how images are used to enhance the aspects of the dwelling in order to lure prospective buyers.

Here is one candidate found after only 10 sec search:

Candidate 1 (link)

Physical aspects: dirty, old, electril cables attached to the building, no architecture (chidren drawing type architecture), no parket, chicken style boxes and very small. For 21 m2, it looks more like a "jail" cell than a flat.
Geospatial aspects: No parks around - no space or trees
Financial aspects: Price 6500 euro per m2


Anonymous said...

Indeed a crap one ... You need to consider something ... people tend to believe that small studios are a good investment since you can rent them out easily to students ... Thus leaving to overpriced assets ... and major bubbles for these appartments ...

Here an article from Helsingin Sanomat "Helsinki residents consider housing expensive and of poor standard
Survey shows that Helsinki’s quality of housing is among the worst in Europe"

So no surprises ...

HousingFinland said...

Thanks Eric,

In fact the situation looks so similar to 1990 in almost all possible measures, maybe a bit worse.

People investing in housing while interest rates reach multi year low 87-88, banks lending amount reaching record high, stock market collapsed first (1987) then recover to dip again (1994), government debt goes out of control while export suddenly collapse (this time it will be probably China as opposed to Russia back in 1992). The big difference is this time, I cannot foresee the rise of a giant i.e Nokia ... in fact we have a demise- so the situation could get quite ugly.

2011-12 was and has always been the period I highlighted as the opportunity for both housing and stock market if the system is kept afloat otherwise only gold will have some kind of value...

Anonymous said...

But we are in for a good autumn for home sales! I find the inclusion of lack of rental property in reasons for the prices of houses keeping interesting:

"Real estate agents are still optimistic that autumn property sales are to be lively in Finland, even though commercial expectations fell slightly short of forecasts for the sector, ....

The sector remains confident about its outlook for the end of the year. Particularly low interest rates and the shortage of rental properties on the markets are expected to improve sales in centres of growth.

The sector's recovery from the recession began last autumn and the positive trend has continued in 2010."

"Island Crow"

HousingFinland said...

Thanks, Island Crow

In fact, that's always the reasons provided at the high of the market: lack of rentals, foreigner buying, lack of land space, lack of property available on the market etc... etc..

I think the two decade housing market growth is running out of steam...all possible mean to support the housing market have exhausted, now the question is how fast and how much the market will correct.

Anonymous said...

Everything hangs on interest rates.

That kaampi flat looks cheap if a mortgage only costs 2%.

The ECB is still providing life support loans to southern europe which in turn supplies life support to northern banks. Meanwhile the main worry of the ECB we are told is deflation.

So far since the lowest one year euribor was reached our mortgage is 6 euros more expensive per month. Meanwhile our monthly income has increased far more than 6 euros.

Andrew said...

Big jump in one year euribor today of 14 thousandths, after steady daily rises of 3 to 5 for many weeks. Doom and gloom is back on.

Anonymous said...

Bit of a cheap shot there. I have three words for you: Location, location, location.

The more central the location, the less important everything else becomes. Some people (students for example) perceive location as a prime metric of value.

Not everyone does that. If you are looking for value for your money then you might want to look elsewhere.

Go to any metropolitan city and you will similar types of deals purely because of the perceived value of the location.

Here is an example showing you that in Helsinki it's already also possible to buy a flat for 1800 euro / sq. m

If you want to talk about overpriced or unclarity then please explain this deal to me:

Quite a bit of difference in monetary terms yet only 22 square meters difference in living space.

Anonymous said...

From the bottom of the article that Eric provided in the first response to this post:

"Paris (75th and last)
It is very difficult for a family with an average income to acquire a home of their own. For example, for EUR 250,000 one could buy a 34 square-metre apartment with two rooms in the 19th district on the outskirts of Paris.
The kitchens of French apartments are normally not equipped. In the above-mentioned apartment, the kitchen has only an oven, two hot plates, and a worktop. In addition to the selling price, the resident will have to pay EUR 85 per month for water and garbage disposal. This spring, an average of EUR 8,000/sq.m. has been asked for apartments in Paris. "

Andrew said...

Two items of news and my comment follow:


Finnish household debt continues to rise
7/2/2010 at 11:16

Finland's household debt burden rose by about five per cent last year to stand at an average 63,780 euros, with interest expenditure falling by a third, Statistics Finland said in a statement Friday.

The agency added that the country's household debt load had risen by about 90 per cent in real terms between 2002 and 2009.

Last year, housing mortgages accounted for some 71 per cent of household debt, up from about 65 per cent in 2002.

Finnish showrooms shifted about 62,400 cars in the year through the end of June, up by about 20 per cent year-on-year, the Finnish Information Centre of the Automobile Sector said in a statement on Friday.

June's new car registration figure jumped by about 55 per cent year-on-year to some 12,200 vehicles.


Kind of interesting that on the evening of the worst recession since the dawn of time that people are still spending like no tomorrow!

Anonymous said...

no comments from Housing Finland on anonymous?

Anonymous said...

Very glad to discover this blog.

While real estate developers are currently benefiting from shameful margins, they get away with murder.

Please read the following article:

However, I've been following the market since a bit more than one year now, arriving lately in Finland, and was wondering how this increasing housing price could possibly go on taking into account the boom of unemployment in Finland, recession, and now even increase of the interests rate.

But latest news on tv or newspapers are now talking about what you seem to have been expecting for a while...a strong slowdown in the house selling market...

Anonymous said...

Found this interesting chart in the US ...
Interesting enough, they have been pretty quick to burst their bubble ... not the case in Europe ...
My question is: "Why Europe is different ... furthermore what is different in Finland?"

waterborne said...

Interested in knowing, is this a silk purse or a sow's ear?
19 malminkatu Pori

It has the location^3 thing going but needs lots of work. I wonder if the 'bubble' you speak of is more Helsinki problem than a Finland problem? After all, most of Finland has MUCH lower cost/m2 values and speculation must certainly be more scare where growth is also scarce?

Anonymous said...

True that it sticks a bit more to the "Grand Helsinki", although you can also find new construction programs in much smaller cities such as Vaasa, Pori, Kuopio with price per m2 above 3500€/m2, which may look a bit odd.
I would say that this system enabling the real estate developer to substitute the bank is one of the main reasons explaining these still very high market prices.
Because I think they, unluckily for the helpless honest buyers, and taking into account the tremendous margins I mentioned above, have the shoulders to wait several months before having to lower their prices and therefore affect the market prices.

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