Saturday, 28 June 2014

Growth of housing loans halted

Average housing loans of dwelling units with housing loans in 2002 to 2013

"According to Statistics Finland's statistics on indebtedness, the average housing loan of household-dwelling units with housing loans was EUR 93,620, which was in real terms around EUR one hundred less than in 2012. In the early 2000s, the average housing loans grew, on average, by ten per cent per year, but the growth has slowed down significantly in recent years.

Another indicator demonstrating that the start of the downturn of the housing market.

Sunday, 15 June 2014

Finnish Housing Price falling...

"In the first quarter of 2014, prices for old single-family houses fell by an average of 3.3 per cent from the previous year in the whole country. 
In Greater Helsinki, prices went down by 8.9 per cent from the corresponding period last year and in the rest of the country by 2.6 per cent. 
Compared with the last quarter of 2013, prices of old dwellings in detached houses increased by an average of 0.7 per cent in the whole country."
Source: Statistics Finland 

Finnish housing price have  reached a plateau, a maximum average price that most likely will be an historical one (lasting 1-2 generations?) which will slowly head downward in the next few years.

I personnaly thought prices will readjust after the "financial crisis" in 2009 but I underestimated how low and fast interest rates will fall. Here are some important facts:

  • 98% or more of Finnish mortgage rate are link to the Euribor or variable interest rates.
  • Finnish household debt level is at historical level
  • low fertility rates with a potentially shrink of the finnish population size in the years coming
  • uncertain immigration since mostly linked to the economical situation (which is not that rosy)
To me, I could bet the following:
  • 2009-2013 period was a temporary one that saw prices rise due to low interest rates and supported by two decades of rising prices that anchored expectation.
  • 2014-2019 slow downward price adjustment with slowly mindset change with regard to future price evolution
  • 2020-2025 sharp decrease as interest rise and oversupply. 
As an investment, housing will be a poor one unless the Euro currency disappear ;-)