Housing prices

On even week numbers there is a housing price bubble in Helsinki and on odd week numbers the prices are going to skyrocket in the future as there is no bubble and housing is undervalued. By applying some common sense, the world has seriously gone insane. Or at least Finland has gone insane. With two-room apartments (that is two rooms, not two bedrooms, mind you) running in the region of quarter of a million euros in Helsinki, how can there not be a bubble. If you want an apartment for less than that, it's off to the suburbs for you and even then it might be difficult.

Consider this... If you would like to pay off an annuity loan of a quarter of a million euros with a 2.5% interest rate and about 1000 euros per month, this would take roughly 30 years. That's quite hefty, considering the average income levels, degree of taxation, and other related factors in Finland. How can there not be a bubble?

Furthermore, factor in the shitty economic situation and the fact that the traditional footholds of the Finnish economy, from mobile device driven high-tech to the forest industry, are crumbling. Job security is decreasing, government debt is rising along with budget sizes and nobody seems to be able to tackle the problem in a sustained fashion (increasing the already hefty level of taxes for middle classes will end up kicking the nation in the ass...), how is it possible that regular people feel comfortable taking out loans of said sizes?

There was another genius analyst this week in a local newspaper stating that housing prices are under pressure to go even higher up. His rationale? Because rents are rising and this means that housing prices must also rise. How does this make sense? Could it be that rents are rising as people are getting laid off and must adjust their stance into a more flexible one, driving demand for rentals up? If so, why would the house prices go further up? The only way for the prices to rise would be if consumer confidence in the future is high and cheap credit is available. Confidence shouldn't be too high precisely because of the fact that competitiveness is down (both national and Euro-zone), job security is down (thanks to structural shakeups in the industries) and income levels in relation to current housing prices are seriously low. And availability of cheap credit? That worked out so well the last time around...