Tuesday, 27 December 2011

Consumer Confidence - New York Times - Finnish Housing Price

"Helsinki’s housing market did not suffer greatly in the wake of the 2008 global economic crisis.

“First, there was no price bubble prior to 2008,” said Jukka Malila, the managing director and chief executive of the Central Federation of Finnish Real Estate Agencies.

“Secondly, Finnish people were initially frightened by collapsing banks abroad, but they realized they were not affected, as Finland is quite isolated, and went on living their lives as usual. So consumer confidence is high.”

Mr. Malila attributes Finland’s relatively levelheaded response to the downturn to the lessons learned in the early 1990s, when the collapse of its neighbor, the former Soviet Union, sent Finland’s economy into a steep recession.", NYTimes, May 2011
Interesting to see the confederation of Finnish real estate agent doing marketing on the New York page, sign of despair, sign of trying to support a housing market by trying to bring "dollar collapsing purchasing power" investors.

The housing market that has topped in the same way it did in the early 1990's but this time:
  • Nokia is collapsing while at the time it was emerging as a global player
  • The European Monetary Union is questioned while back then it was a savior (in 1996, Finland join ERM, and in 1999 the EMU)
  • Emerging market were powering off, China and India economy exponential growth started...today both are struggling with slowing economy, high inflation and property price bubble.
  • The active population is shrinking at record level due to historically high growth level of retiree population
So the situation is more dire than it was in term of future outlook.

In all cases, I wanted to highlight the timing of such article relative to the "consumer confidence" and the perfect timing of its release. It highlights somehow a knowledge of the deteriorating situation back then (in fact, we were in the mist of the Euro crisis, and a worsening of the financial crisis that started in 2008).

Now, this is what happen afterward....in December 2011, the Finnish consumer confidence has collapsed, approching its worst level made at the beginning of the financial crisis, and even worse than the IT Bubble of 2002. Here is the chart:




14 comments:

Balmat said...

Always good ... I wonder what Jukka Malila would say now ...

Whatever the country, newspapers always ask the guys working in the real estate industry whether or not there is a bubble ... really really funny ... obviously the guys will always say what is good for them ...

Shall we reintroduce the "Tarring and feathering" for the real estate experts who keep telling us that the sun is shining ;-)




funny that it is the managing director and chief executive of the Central Federation of Finnish Real Estate Agencies

Balmat said...

Have you noticed how they are telling us how the stock-market behaves ... It is as if they are presenting the weather ... crazy ...

Anonymous said...

As always, a news from a media is what paid to produce and publish, isn’t it?

What surprised me is the reporter doesn’t even bother to pack the product to make it more trustable. Maybe, their readers are considered brainless.

Anonymous said...

A bit dissapointed that the article you refer to is from last may - a lot has happened since then in the eurozone.

Finland is one of the few countries with AAA rating in this area, which combined with a relatively low debt as a % of GDP should give it at least some extra strength to cushion any blows.

Not in the least because the country has demonstrated to at least have better watched over it's debts than most other countries - That has to count for something.

As for demographic changes - this will most likely hit rural areas because the demand in the metropolitan area remains relatively high. At least in the area I live in there is no increase in the number of houses for sale since 2008.

HousingFinland said...

"...from last may - a lot has happened since then in the eurozone. "

Somehow I miss this article, not really reading the NY Time. On the other hand it's always interesting to see what people say after a certain time, whether they are visionary or... blind.

Regarding the AAA and housing market, As far I understand the US is still AAA, has control over the reserve currency, put interest rates to almost 0, yet housing price has been divided almost by 2 in dollar term, even more from a euro perspective.

Also If I look at some the Finnish Stock market and associated blue chip company such as Nokia, Neste, Talviraa mining, YIT, UPM. Fortum have seen their price divided by 2-3... that tells you a lot:

1- Finland is an export driven economy, when the rest struggle (i.e Europe, China, India, US, Russia) then the economy suffers

2- Internal fundamentals are weakening,wealth effect due to rising housing price or ever falling interest rates is vanishing while at the same time debt burden is growing amid coming rising unemployment...

So do you still believe that trees can grow to the sky, I suppose as much as you believe that Santa Claus is Finnish :-)

Andrew said...

There is plenty to worry about at the moment. However the bigger problems are with Italy and therefore France. France and Italy are both pretty desperate to get the Germans to print even more money than they are currently allowing as the banking fiasco rolls on and on. Germany is also an export orientated country and as Germany goes so does Finland as far as i can tell. I have no doubt if the German economy weakens Germans will also be clamouring for more stimulus from the ECB. It is certain they will permanently purchase more Euro debt, attempt to keep growth positive and inflate their way out.

HousingFinland said...

Hi Andrew, always a pleasure to read you.

Well, somehow the ECB is trying to push European country to structurally get stronger (make reforms, review the way they spend their money, be more competitive...) and not count on artificial measure: inflating its way out.

France during the 70's-80's did play the inflation card (they devaluated the Franc instead of trying to be competitive in a more lasting and structural way - as the german have currently done) resulting on decades of poor economical performance...

I believe Finland in the beginning of the 90's went through a period of deflation and made bold reforms (and also with luck) that allowed to get stronger hand and gave them the foundation to strive in the two decade that followed. However today, leaders/politicians seem to act after the event or do not see the need - that's the ransom of success (a pretty good example is Nokia or the fall of a giant from vision to blindness - success make you blind, catch you guard...)

In all cases, I wonder how it will all end knowing that Italy, Spain, Portugal, France, UK etc.. all have massive issues... 2012 will be an interesting year.

And as the FED said, they will maintain interest rates at zero until at least 2013....so it seems that until then turbulences will be around.

Andrew said...

HF, Greetings to you also.

The Italian government is for example now gauranteeing private bank debt so these bonds can be be used at the ECB. And you can guess the arrangement is that the banks in turn buy Italian government debt. So we already have plenty of support for the inflate their way, grow their way out attempt.

Germany struggled thru the early days of the Euro, where the ability of the Greeks and so forth to buy BMW's financed by Germany must have been a major factor in the ability of Germany to be an export 'success'.

Quite possibly we are going to be looking at exceptionally low rates for much much longer than 2013. How are we going to deal with rising oil prices and economically failing alternate energy solutions? Deflation is for sure right there in our faces even with zero interest rates.

Andrew said...

HF We dont seem to be able to comment under your new year greetings post - presumably because there is no text for your post?

Dispite all the gloom, Internet detached house listings in Helsinki are quite low at 77 houses and at least what could be called normal. Too early to say if this is people deciding to hold on because of lower rates or buying activity as people decide that property rather than cash or other investments make sense. For sure i bought in Helsinki because cash did not seem to make sense to me - at that time.

If Finland is like Germany, Germany has rising house prices, low unemployment and so forth.

Finland now has more or less record low 10 year borrowing costs.

Supposedly the ECB will lower rates again in February and is already scheduled to do more massive lending to the banks in March. Given the stresses in the system you can see that the ECB is going to be extending these loans for years to come until either the banks have recovered or the system implodes. And prior to implosion you know that the ECB will be printing like crazy.

Meanwhile places like Portugal seem to have got the German message and are now trying to borrow money from their old commodity rich colonies such as Angola. You would imagine too that Brazil might be interested in investing in Portugal?

Anonymous said...

@HousingFinland

Clearly you have not done all your homework otherwise you would not spell gloom and doom over Nokia and / or Finnish industry in general.

Here is but one example about Nokia:

http://news.cnet.com/8301-1023_3-57354010-93/windows-phone-to-revive-nokia-this-year-says-analyst/

and here is where you can find a set of key economic performance indicators:

http://www.ek.fi/ek/en/economy_and_trade/index.php

Andrew said...

Anonymous

Your second link is a useful one but the data on that page is from May and refers to 2010 expectations for 2011.

Have you got any up to date news?

Alex P. said...

Will there be a better consumer confidence on Finland housing for 2012? A lot of people are asking that, even professionals. I wonder how will it be for this year?

New York Real Estate CE

HousingFinland said...

Hi All,

Regarding Nokia, it is a fact that the strategy they undertook in the beginning of the millennium was a failure and almost sank Nokia. Lack of Vision and execution was the perfect recipe for its collapse in 2010.

So Microsoft, as a predator cam to the rescue - saving a faltering company from excellent competitors such as Samsung, Apple and OS providers google.

Now the lesson learned:
- Never be blind by success.
- past growth and success does not automatically translate in future growth or guarantied success.
- Never underestimate your competitor
- Do not sleep on your success
- Be humble

So without transition you could apply the same thing for the housing :-)

I had a chat with a friend a eager buyer two years ago, lately he had to sell his house. After many showing without any visitors , he started to really stress as he really had to sell (He was living the country). Finally in almost the last show, one visitor (a family) that made an offer (I didn't dare to ask whether it was equal or lower to what he had paid). So he finally sold his house. In the same residential area , there is another house for sale...ad still not selling and was advertise at the same time. This was in Espoo.

A story that tells a lot especially when it's coming from the ground and not from the media (that somehow lost their credibility or accuracy in term of information that they are vehiculing).

In fact the psychology start changing around...something never witnessed in the decade or more.

In addition, they are building a lot and more housing is coming in the pipeline. To that, you had measures that the government want to put in place to promote builders to invest in the renting business (through subsidies)... that could spell hard time a housing market that gone way beyond reason.

Andrew, I disabled the comments in the "new year" related post - I suppose it's a bit late to put it back.

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