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).
2 comments:
Thank you for this interesting chart
From: http://www.stat.fi/til/velk/2010/velk_2010_2011-07-01_tie_001_en.html
During a decade, household-dwelling units' debts have gone up by clearly more than their income. Between 2002 and 2009, their debts grew by 88 per cent in real terms and their disposable income by 22 per cent. The rate of indebtedness of household-dwelling units, that is, the share of their debts of their disposable income, was 70 per cent in 2002 and 109 per cent in 2009. Household-dwelling units with debts equalling at least their annual income numbered 483,200 in 2002 and 693,200 in 2009.
Household-dwelling units where the reference person was aged 25 to 34 were the most indebted. In 2009, their rate of indebtedness was 193 per cent. With the exception of the household-dwelling units of under 25-year-olds, the rate of indebtedness went up from the previous year in all age groups.
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Basically the debt level keeps increasing ... we can now expect to have the interest rate going further up
Have a look to the Euribor trend ...
http://www.euribor-rates.eu/euribor-rate-3-months.asp
We are getting there ... let s see ...
Let s see if the correction will be over several years or quarters ...
Adding to this the end of Nokia ... and Finland will go full speed in reverse mode ...
Balmat, actually, I don't think interest rates - For now - are going to shoot up. On the contrary, they will fall due a poor global economy.
Have a look to the next article...
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