A recent doctoral dissertation argues that there is no bubble in house prices in the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Helsinki metropolitan area. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

According to study, the development of house prices can be easily forecasted by observing certain fundamental factors like stock market development, credit base and historical prices.  I have not read the piece but obviously this is based on some statistical evidence from historical price data. But, as we know, future is uncertain and when subjective and objective probabilities are considered, we can not say that history repeats itself.

According to study there is no bubble what so ever. Rapidly risen prices are explained by heightened income level, increasing population, and the fact that, at the same time, lending to households is increased. I am not professional in economics, but how in the earth, increased lending can indicate that there is no bubble in the prices. I think there is a bubble which is due to that particular increase. If you have, for example, valued a stock and come up with result that it is overvalued, does the fact that you can borrow money easier justify the overvaluation? And yes, I am familiar with supply and demand theory. In fact, I do not know is the most important fact mentioned in the study, which is that supply side is restricted due to big constructors who control the supply! This has created the overvaluation in prices – the problem which can be solved only by politicians. The study says it is the sea that is restricting the increase of house base. I wonder is the author familiar with the Vuosaari harbor project.