Wednesday, 3 August 2011
Finnish Construction Sector - A Market View
A picture is worth a thousand words as the old
banker wise once said. Above is the construction and engineering sector in Finland. Apparently the market is seeing a sharp slow down, something similar to the summer 2007 where a year after the housing market made a tentative readjustment.
Talking about the readjustment that did not happen in 2008, there are many reasons for that.
1- Interest rates tumble, literally fell in a free fall - helping interest rates sensitive mortgages, which represent above 90% of Finnish mortgages. To that, add also the record length of mortgages provided by bankers.
2-The current crisis (which we have yet to see the end) was a threat to the banks and the financial system as a whole. During that period, real estate was seen as a safeguard - at least money had to be parked somewhere perceived solid. The same was witnessed for Gold, Silver etc...
3-A relative game, North europe is seen as safer than the south in all possible dimensions, hence investment is rolling, fueling , even greater household leverage, that have been pilling up debts, as never witnessed before. to that extend, Banks had never stopped lending...
Nevertheless, the market is saying that the housing sector or construction sector is about to experience "something" not so good. A simple readjustment or an "Iconic Nokia" type readjustment that could bring price toward their 1996 prices. Time will tell.