Monday, 7 February 2011

Finnish Housing Market

We have all in all 6 clearly defined scenario - that a fact. The question is what will enable one of those scenario, also what are today's elements that could favor one of those.

Let's first describe each of those scenario , secondly set the current political, economical and social context, and finally put some probability on each one, highlighting one. All need to be done in a neutral and analytical manner.

Since lately I have been quite busy - I will complete that on a regular basis. You are free to provide some elements. It will be very fruitfull to have a collaborative approach in this analysis.

Scenario 1:
Scenario 2:
Scenario 3:
Scenario 4:
Scenario 5:

Scenario 6:

Population is ageing very fast which will put the housing market in a completely different direction, at least not behaving as it did since 1980. This could unleash a Japanese type housing scenario. You will find more on the following article: Scenario 6 : Toward a Japanese Style Correction -60%?

Context: Economical

Context: Political

Context: Social


To help on that here are some important chart to take into account:

Year-on-year changes in index of wage and salary earnings 2000–2010, per cent :

12 Month Euribor charts:

Households' indebtedness

Housing Price inflation adjusted - 2000 as the base (100) :

Finnish housing Loan rate reference:

An interesting point: Trichet, Liikanen are all but leaving this year.


Anonymous said...

Would be interesting to see the scenario 6 ... but the ECB and the European State will never let this one happen ... they might hire Bernanke in order to throw euros notes from his helicopter ...
I will come back with better input to your great blog ... we are all busy indeed ...

Anonymous said...

I am not sure which of the 6 scenarios I would pick, but I wonder if some consideration of the 'disconnect' between housing prices in Helsinki and the rest of the country is needed. [See first graph]

In the bubble years 1982-1991 the index for Greater Helsinki got to be higher than for the rest of the country. After the bubble burst the indexes tracked each other of a number of years, until the price rise was well underway in 1997.

For me this raises the question of "When the current housing bubble bursts will then housing index for Helsinki fall back to that of the country as a whole?" OR "have we seen a permenant divergance in housing prices between Helsinki and the rest of the country as the population of Finland has got more concentrated in the capital region?"

My un-scientific gut feeling is that prices in Helsinki will fall more than the rest of the country, but the index will still be higher reflecting a shifting population basis: so instead of a 40 point spread on the index the spread might come down to say 20 points.


HousingFinland said...

Thanks for your comments, I will update the accordingly and add other elements.

Another interesting area, of course, is debt, especially municipality debt.

This statistic highlight that turmoil is setting up slowly but surely :

Anonymous said...

Getting ugly for Nokia ... not funny but roughly 6000 people could loose their jobs (in Finland) this is a huge number for the size of the economy ... we could probably double this number with the impacts to suppliers ...
let s say 12,000 people impacted ...
This to be added to other bad news which will come down the road and ... may be we will see a small impact to the housing market ... What do you think?

Billpete002 said...

I think they shouldn't have been getting 15mil EUR a year of tax payer money from Tekes...

Go figure a company that is subsidized by the government is inefficient to compete with the semi-free market*.

It's high time Finland (and frankly the West) learns that "investing" (read wasting) tax payer money on loads of companies to compete against the US is a huge burden for society (which is growing older by the year and still has HUGE welfare programs). It's not with the US we should be competing against, but the East.

Only way we can do that is dumb the subsidies, reduce the welfare, and toss out many (and in my opinion: all) regulations and barriers for entrepreneurs and small companies.

Trying to start a company here in Finland in some sectors is damn near impossible.

*all the lobbying power of Microsoft and Google...

Micky said...

If the trend goes on, the Euribor curve actually looks like an evil trap: the tide is so low that everyone dares rushing to enjoy the easily accessible money.
But what when these innocent fellows will suffer a continuous rising interest rate? More than 90% of them have borrowed that money with a variable rate...
Will the high-tide back drown them? There's every chance.

But at least they'll be able to enjoy the good old memory that during one, or let's say, 2 years, they once could enjoy a very low interest rate (although on a 20 years loan, you don't reimburse much capital)...
I'm sorry for these fellows, but looks like this could really happen.

Anonymous said...

"...It's not with the US we should be competing against, but the East."

WOW, someone does not even understand the reality of today's world, while drafting a top level strategy.

The problem of this world is there are too much property in the book but too few real wealth available for the match.

People are getting richer and richer, more and more inside the virtual space, while they consume and shit a lot of the real stuff!

I would say, if they do not behave, they have to eat themselves from the feet soon, since there will be no one else left to eat then.

HousingFinland said...

Since scenario 6 was the most commented I started by this one - see link:

As I said it is not my preferred however was a true possibility during the peak of the crisis in late 2008.

HousingFinland said...

Regarding Nokia, Indeed the management was lucky in the late 1990's run up. At that time I think we confused luck with genius.

I think they called then the dream team - I would nick name then the lucky team. The real genius should have occured after the technology bubble of the year 2000.

Nevertheless I feel that Nokia throw the pinguin through the window - the move out of linux based os to a window based system is like selling the soul to the devil...

Anonymous said...

Well it is the end of Nokia ... as we knew it ... I have been telling for some years that Nokia needed to reinvent themselves or they will collapse ... I received nice smiles ... here we are ...
Interesting news today the ECB will increase the interest rate in April ... wondering if this will suffice to limit the inflation and furhtermore prevent us from having to deal with the end of the euro ...
I am now waiting for 2012 ...
I do not like the webpage but the video is interesting ...

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