The economic outlook for construction has clearly weakened due to the war of aggression launched by Russia in Ukraine. The biggest harm is caused by the sharp increase in costs and the growing uncertainty towards the end of the year. Rakennusteollisuus RT predicts that construction will continue to grow by a couple of percent this year and will turn to a decrease of the same amount next year.
The large number of housing projects started before the war in Ukraine and the pick-up in business premises construction will keep construction in positive territory this year. However, the volume of new construction will fall next year, especially in housing construction. Repair construction is expected to maintain its level and continue to grow. Civil engineering will turn negative for next year.
Future construction investments are associated with increasing uncertainty. It is almost impossible to predict the development of costs, which significantly complicates the operations of both customers and construction companies calculating offers. In the survey conducted by Rakennusteollisuus RT to its members, the majority of companies estimate that investments will be postponed or even cancelled.
"We now need crisis flexibility between customers and suppliers and the readiness to look for solutions together to secure the continuity of projects. We cannot influence many things with domestic decisions, but this is in our own hands. The example of the public sector in particular is of great importance", CEO of Rakennusteollisuus RT Aleksi Randell says.
Finland needs to be tied more closely to the west also with transport connections
In the infrastructure and machinery sector, the considerable price increase of fuels is disciplining contractors with a heavy hand.
"Infrastructure contractors have been left as an intermediary in the cost support package that is now in the opinion, which includes subsidies for other sectors affected by fuel costs. The machine industry must be taken into account", says Aleksi Randell.
In turn, the budget cuts put the development of transport infrastructure into reverse gear.
"Finland should now even more strongly direct foreign trade and routes to Western Europe. This requires purposeful development of our logistical connections and ensuring accessibility. The hoped-for future will not come without future investments", emphasizes Aleksi Randell.
The housing market situation remains stable
Housing starts will drop from a record high level this year by an estimated fifth to around 39 housing units, which is still a historically high number. Next year, Rakennusteollisuus RT predicts that the starts will settle at the level of the long-term housing production need, 000 apartments.
In Rakennusteollisuus RT's housing production survey in May, companies' assessment of this year's starts of self-financed rental apartments is almost at the same level as in the survey conducted in February, before the war in Ukraine. On the other hand, it is expected that there will be significantly less independent housing production than was estimated at the beginning of the year. According to the survey, approximately the same number of self-financed rental apartments and owner-occupied apartments will start to be built.
At the beginning of May, RT's member companies had about 4 new apartments for sale. The share of completed apartments for sale remained at a very low level, at just under 400 apartments. The supply will be increased by the large number of apartments being completed and started this year.
"The slowdown in economic growth, the rise in interest rates and the temporary saturation of the rental housing market are slowing down housing construction, which was at a record level. However, the situation in the housing market remains quite good," says the chief economist of Rakennusteollisuus RT ry Jouni Vihmo.
"Demand is maintained by rapidly growing household incomes. Inflation eats away at the purchasing power of wages, but at the same time it also pays off debt. Accelerating inflation keeps real estate and Finland's stable housing market attractive in the eyes of investors as well."
In the housing production survey, 96 percent of the survey respondents felt that the rise in construction costs greatly hindered the start of housing production.
The increase in the prices of materials and the unpredictability of cost development, as well as downside risks from the European economic development, can cause larger than predicted downward correction movements for the entire construction.
Materials:
The materials of the economic survey and the results of the spring 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
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