Short status on a pretty peculiar Finnish housing bubble:
Interest rates, especially the 12 month Euribor (for which 98% of the Finnish population have locked their housing mortgage rate), have gone down from a high of 5% beginning of the decade to reach almost the zero level in 2012 as shown in the chart above.
Central banks have been fighting deflation since the crisis started in 2008, lowering rates to unchartered level. The effect was to support artificially all asset prices.
In Finland, as highlighted earlier, the housing market is hugely sensitive to short term interest rates(Euribor) , and the collapse of the Euribor to almost "Zero" helped avoid a readjustment in the short run.
This has renewed optimism in the Finnish housing market and induce the belief that the housing market is sound - a very dangerous dangerous asumption.
In addition, this optimism in the market has led housing builders to ramp up their production after a freeze in 2009 (at the peak of the crisis). Eventually, housing stocks are accumulating as more and more housing are being put in the market without finding any buyers (even though interest rates are at level not seen since the creation of the republic of Finland).
Also the economical outlook (see figure above) is deteriorating for an export oriented economy, added to that a ageing population with potentially (in the next decades) a shrinking population...all points to a scenario which tend to be similar to the Japanese experience.
And I let you compare it with the Finnish market, with a potential historical peak reach during 2010-2012:
