The economic turnaround in construction has been fast. Construction shrank by 4 percent last year, but for this and next year Rakennusteollisuus RT predicts growth of a good one or two percent. The biggest driver of growth is housing construction, which has once again risen to a record level.
Construction growth is focused on the end of this year and the first half of next year. Slowing economic growth in 2023 will also put limits on construction. Cost development is the biggest single threat to construction.
"The turnaround in construction prospects has been fast. The previous uncertainty and weak demand has turned into concerns about the severe cost development and the availability of materials and labor", Chief Economist of Rakennusteollisuus RT Jouni Vihmo says.
The construction industry RT estimates that 44 housing starts will accumulate this year, which exceeds the long-term average need by a quarter, and about 000 next year as well. In apartment building construction, rental housing production will decrease, but the share of owner-occupied housing will increase. Single-family house construction has received a strong stimulus from the corona pandemic, and there are 40 percent more starts than last year.
"Housing construction is now at a record level in recent history, but the situation in the Finnish housing market is stable. The high production volumes correspond to the low supply of new apartments for sale and the strong demand. Housing production will gradually slow down from next year," says Jouni Vihmo.
Business premises construction can catch up with growth, especially due to industrial investments and the demand for warehouses and logistics facilities fueled by online shopping. Renovation construction is also returning to growth after a couple of weak years. On the other hand, infrastructure construction is decreasing next year. Construction employment is expected to grow this year and next year after last year's decline.
Construction is an extreme phenomenon in Finland
"In Finland, the amount of construction is developing through the extremes compared to other Nordic countries. In a normal economic situation, construction grows less than in other Nordic countries, and the fluctuations in economic downturns and upswings are bigger here," says Jouni Vihmo.
"Strong economic fluctuations in construction are not good for the national economy or construction. An even more predictable operating environment for construction should be created with long-term infrastructure, smooth planning and regulatory consistency. It would smooth out cyclical fluctuations and support sufficient housing production in the long term. It could also avoid cost spikes like the one seen this year, which put a strain on, for example, public construction."
Large urban areas drive Finland's growth
In recent years, large cities' investments in development and infrastructure projects have triggered a lot of housing and other types of construction. The most recent examples of this are Raidejokeri and Tampereen ratikka.
"Cities don't wait for growth, they do it. There are enough financiers for projects in good locations, but otherwise funding is tightening in many ways. This means, in particular, an even stronger concentration of new construction in growth regions. There should be a proper discussion about the conditions for housing construction. Now our housing policy practically only revolves around state-supported production, which is an extremely narrow perspective", CEO of Rakennusteollisuus RT Aleksi Randell says.
Materials:
RT's 12.10. the economic cycle review published in its entirety and the results of the autumn housing production survey can be found on RT's website www.rakennusteollisuus.fi/suhdanteet
You can download key business cycle graphs and other current graphs from RT's pattern bank www.rakennusteollisuus.fi/keskeiset-suhdannekuvaajat
For more information:
Chief Economist Jouni Vihmo, tel. 050 520 1636
CEO Aleksi Randell, tel. 0400 500 822
Director of Communications Merja Vuoripuro, tel. 040 587 2642
E-mails firstname.surname@rakenskunteollisuus.fi