The strong decrease in housing starts has dragged construction into a recession. In its economic review, the construction industry RT predicts that construction will shrink by 3,5 percent this year and will remain in the red by half a percent next year.
The biggest slowdowns in the number of construction starts were already seen in the last half of the year. The Finnish economy is expected to turn to growth at the end of the year and employment to remain at a good level, which also supports the gradual recovery of construction.
"After the continuous drop throughout last year, we are now knocking on the level in construction permits and starts, from which the rise has started on average in statistical history", Rakennusteollisuus RT's chief economist Jouni Vihmo says.
Although the companies' expectations in the most recent surveys have been slightly more positive than last fall, production will continue to decline for a long time and there is no chance of a return to the former. There are no big or fast factors supporting the entire construction in sight. The risk of a period of slower growth is significant.
"Finland has been built exceptionally cheaply and a lot in the past boom period. Zero interest rates and a moderate cost level have especially accelerated housing construction and started public construction."
"The era of being debt-ridden is now over, interest rates and the cost of living remain at an elevated level, unpredictability in the economy and politics is increasing. At the same time, the regulation of financing and construction is tightening. The equation is very challenging and we need stabilizing political decisions", says Jouni Vihmo.
Apartment sales have decreased and the supply is increasing
The rise in interest rates and cost of living, which has continued to be harder than anticipated, together with the growing supply of apartments, is drastically cutting housing starts. Both consumers and investors are on a wait-and-see basis, and state-supported ARA housing production has collapsed.
The construction industry RT estimates that starts will decrease by almost a third this year to around 27 apartments. Last year, the number of starts decreased by a fifth.
"Finland's stable housing market does not have the ingredients for a bigger negative spiral. The price development of apartments has been slow since the financial crisis and we have not had a price bubble. The rise in prices caused by the corona pandemic has already melted away," says Jouni Vihmo.
In the future, other new construction will be supported by the industrial investments and office construction fueled by the green transition.
The leveling off of the cost development makes it easier especially for renovation construction and land and water construction, where the cost increase has been historically fast. However, infrastructure construction is being eaten up by the decrease in foundation work. In addition, the state's infrastructure projects and the maintenance of the road network are subject to great uncertainty in an election year and under the pressure of savings in the public sector.
Materials
More information
Chief Economist Jouni Vihmo, tel. 050 520 1636
Director of Communications Merja Vuoripuro, tel. 040 587 2642
E-mails firstname.surname@rakenskunteollisuus.fi