Saturday, 28 January 2012

Prices of dwellings fell in December

Development of prices of old dwellings by month, index 2010=100


Development of prices of old dwellings, index 2005=100

Source: Statistics Finland

What is important is to see if a downward trend has really started. In all cases the upward trend has been broken as it did during 2009 in the midst of the financial crisis. Wait and see...

So the ECB averted a serious credit crunch in the last quarter of 2011. Again, is it just delaying the inevitable? In the meantime, Euribor is falling, again providing some oxygen in the housing market, but for how long ? (2014 as suggested by the Federal reserve, the American ECB)?

Coming back to the Finnish housing market - we will see a readjustment in prices at least due to sellers coming back to reality and understanding that the demand is shrinking while first time buyers are priced out.

Another interesting chart, is the wage versus housing price which shows you a disconnect in 2010. That tells to me, that we will have at least 2 quarters of readjustment - if wages stay stables which is not fully granted...
Year-on-year changes in prices of dwellings and in wages and salaries

Note, also that prices have kept going up since 1993 with minor correction along the way. Also Since 1974, percentage change in Wages have been declining. The only time we did not have any growth was in 1992 and 1998...are you going to see the same phenomenon or worse a new one: wage deflation?

7 comments:

Billpete002 said...

While I agree with your premise (Finnish housing is in a bubble) This hasn't broken the key trend line yet so there might be a rebound (the housing market might be taking a "breather")

The downward trend might be a pause in government slush funds going towards housing construction and renovation.

Just playing devil's advocate ;)

Keep up the good work

HousingFinland said...

Thanks bill.

I was hoping for no reaction at all in this article- you broke the silence ;-) ...that would have been a sign of capitulation of the readers of this blog which I would have taken as a sign of imminent trend reversal i.e. housing bubble burst.... ;-)

I think we are not far from the top...My fair is that the reversal could be slow and long (decades ? japanese scenario). I prefer a sharp deep followed by a healthy trend back allowing first time buyers to step in and banks to take less risky bets... but with governments and policy makers intervention we might be heading toward a japanese type scenario...

Balmat said...

Yep ... was thinking the same ...
I am spending my time with Europe and ... franckly speaking found ms Stubb really Funny ...
He wants to open the Pandora Box ... let s seat and admire what will happen ...

“I am not advocating a Greek default, hard or soft – but I’m not excluding the possibility of it if the Greeks don’t get their acts together,” Alexander Stubb, Finland’s Europe minister, told the Financial Times.
“Europe is prepared. A hell of a lot better prepared than it was on May 9 2010 – and a hell of a lot better prepared than it was last year, so I think we’ve taken the necessary measures.”

Anonymous said...

According to the data on the texti-tv, Januaury saw a rise in the price of old flats/apartments, but still off the recent highs as shown in your chart.

Any suggestions for when the index will drop below 100 (ie back to 2010 levels)?

I notice this index was reset in 2010, but the one for detached houses is based on 2005 data. This makes comparisons a bit more tricky while making the market for houses, on just a cursory glance, look so much better than that for flats (eg the country-wide index comes out as 123,4 vs 102,5)

Anonymous said...

last post by "Island Crow" (I hit the send too soon)

Anonymous said...

I track the HITAS since I own one of the apartments in the program, and the last readjustment was slightly downward. I'd sell except that I think the Government should end the program, or at least amend it to force most of the complexes into the free market. I heard a report from a public policy civil servant of one person who owns 13 and rents them all out - not the intent of the program, and I am only 1/13th as bad while I live abroad.

My friend here moved into a house he bought for 2,800.00 US(yes, two thousand eight hundred) that still had the copper plumbing and wiring intact, a good roof and nothing much wrong with it other than being uninsulated, of dated decor, and in a below average neighborhood. Plenty of deals so welcome to the (soon to be broke, or maybe already broke and soon to realize it) USofA.

HousingFinland said...

http://www.tilastokeskus.fi/til/ashi/2012/01/ashi_2012_01_2012-02-24_tie_001_en.html

An update, obviously it won't go in a straight line especially when the mind have yet capitulated. It is just a matter of time