This year, construction is clearly growing faster than overall production. The driving force is urbanization, which increases the need for residential and commercial construction as well as infrastructure construction in growth centers. The total amount of construction will rise by 3–4 percent, Rakennusteollisuus RT predicts in its spring business cycle review.
Last year, after three weak years, construction turned slightly positive, 0,2 percent. This year, growth will continue at a faster pace. Several large-scale individual projects are underway, but construction in large urban areas has picked up on a wider scale as well.
"The growth spurt is partly explained by the low starting level as a result of the drop in previous years. The construction market is like children's clothes, there is now room for growth. On the other hand, a rapid rise may face resource limitations both in terms of certain professional groups and production capacity", Chief Economist of Rakennusteollisuus RT Sami Pakarinen describes the situation.
Next year, construction growth will slow down to 1–2 percent. The economic outlook is still fragile, and a stronger recovery in construction requires that investments get off to a good start. Construction is typically a post-recession industry, for which economic upheavals are reflected with a delay.
The pent-up housing demand is breaking out
Housing production picked up last year. According to the construction industry RT's estimate, the total number of housing starts was 30. The capital region's share of all housing starts rose to no less than 500 percent.
A sharp increase was seen in the starts of self-financed apartment buildings, the growth accumulated by 34 percent. There is a demand especially for small city apartments. In addition to housing funds and real estate investors, now also consumers have ventured into housing sales after the unemployment situation has leveled off. Thanks to this, the construction of single-family houses should no longer shrink in the current year.
Housing starts are expected to increase this year, but next year the number will decrease. In other house construction, commercial construction has been on a good rise, especially in the capital region, where most of the migration is directed. Similarly, after many bad years, industrial construction has caught up with growth.
"Economic upturns usually start in the capital region, so activity in southern Finland is good for the whole of Finland, as the multiplier effects spread over time", Chairman of the Board of Rakennusteollisuus RT Tero Kiviniemi Comment about YIT.
The near-term outlook for infrastructure construction has improved
In the infrastructure sector, the economic situation has also eased to some extent. Additional allocations for groundwork for building construction and basic road maintenance will keep the growth momentum going. Infra's prospects are darkened by the downward trend of new busway investments. The road and rail projects decided by the government in the framework crisis can be started in the next couple of years, but apart from them, there are no new investments in sight for the entire term of the government, nor even a long-term investment plan. However, the allocation of funding is praised by the builders.
"Prioritizing the scarce funds now hit the button. Both public transport projects that facilitate housing construction in growth centers and road and rail projects that remove bottlenecks in logistics that are central to business life will receive funding. This is exactly the right policy to kick-start growth in Finland", praises the CEO of Rakennusteollisuus RT Tarmo Pipatti.
According to the Infrabarometer conducted by Rakennusteollisuus RT and INFRA, the cyclical situation in the industry has improved as spring progresses. 70 percent of the respondents estimate that infrastructure construction will increase by summer. The positive development was estimated to continue during the late summer and early autumn. The capacity utilization rate was 77 percent, which is 11 percentage points lower than last fall. According to companies in the field, there are a lot of requests for quotations, which may partly be due to the customers' priority-oriented preparation for the future. In any case, there is still fierce competition for contracts, and their price level remains tight.
The cost development of the entire construction has remained moderate. The number of employed people turned to growth at the end of last year and unemployment in the sector has decreased. This year, the number of employed people is expected to rise to 171.
For more information:
- Chairman of Rakennusteollisuus RT,
Tero Kiviniemi, Vice President of YIT Oyj, tel. 040 519 0112 - CEO of RT, Tarmo Pipatti, tel. 040 506 5021
- RT's chief economist Sami Pakarinen, tel. 050 343 4337
- RT's Director of Communications Merja Vuoripuro, tel. 040 587 2642
Materials:
- The complete economic review and the press release can also be found on RT's website www.rakennusteollisuus.fi/suhdanteet
- You can download key business cycle graphs and other up-to-date graphs from the Construction Industry pattern bank
www.rakennusteollisuus.fi/keskeiset-suhdannekuvaajat - INFRA ry's infrabarometer available www.infra.fi