Finnish real estate bubble?

As Edward Hugh stated on his Facebook page on the 14th of February (can’t link that, so please look it up):

The depth of Finland’s recession may raise an eyebrow or two here and there. It was meant to be a very competitive economy. I have long felt, studying the evolution of the trade balance, that it had more to do with the periphery than the core. The economy has been supported by a housing boom, but now that appears to be coming to an end. Not so different from Denmark, or the Netherlands.

As I blogged, I have shown some Eurostat statistics on housing price developments, which I thought did not look like a boom. But now I found statistics from Statistics Finland on square meter prices in various regions of Finland, and they tell something I suspected but could not put in a graph, until now. Please note that the first graph is a combination of two time series (2000-2008 and 2005-2012) which use a slightly different methodology (mainly, the latter has much more indicators on which it measures price).[UPDATE: A commenter has longer range graphs on housing prices in the Nordic countries, which make the pattern even more clearer] The picture looks a lot like the Netherlands – a slow bubble, starting in the 1990s. As for the latter graph, Helsinki 1 is basically downtown, prime, Helsinki, while Helsinki 3 is more of a peripheral area, although public transport connections are very good. Vantaa is (traditionally) a more working class city next to Helsinki, where also the Finnish main airport is located.

Source: Statistics Finland

Source: Statistics Finland

And for the capital region:

Source: Statistics Finland

Source: Statistics Finland

I don’t know how to define a housing bubble, but it seems that Helsinki prices, especially in prime and other near-center Helsinki (this holds true also for 2-room appartments and bigger) have gone up quite a bit. That has to do partly with this:

Source: Tilastokeskus

Source: Tilastokeskus

Although Tampere and Oulu are also growth centers in a sense, the Helsinki region has a much greater pull. I don’t have time now to dissect the nature of those moving to Helsinki (age, gender, where they come from) but from what I know anectdotally, there is quite a shortage of appartments for people who need only a single or double-room appartment, mainly because they are so expensive (for students etc.)

I don’t know if this is part of the possible bubble-story but it seems to happen mainly in the Helsinki area, not elsewhere.

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11 responses to “Finnish real estate bubble?

  1. great thinking… I have also developed some theory on the subject : http://housingfinland.blogspot.fi

    also have a look at this site and particularly at this chart:
    http://www.findikaattori.fi/fi/92

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