Friday, 5 August 2011
Finnish Housing Price - The Party is over?
Considering what is currently happening to the European Monetary vision, considering that Finnish Household indebtedness is showing worrying features, considering that housing price had double nationally since the beginning of the decade, (and even triple or quadruple locally). I think WE ARE ABOUT to witness an historic downturn for the housing and economy in Finland and in Europe as a whole - (and still holding my breath) - The party is about to end.
So far people have been spending, logically in sync with housing price rising, in a phenomenon called the wealth effect. People, sometime forget that housing price are cyclical, and are bound to go down after going up. So how the household will react when his wealth start shrinking, would he continue to take more debt, to spend more? The answer is simply no, based on what is currently happening in the US (high leverage household with falling house price, starting saving quite heavily).