The first half of the year of housing construction has already been wasted, as since March, exceptionally few new projects have started. Three of the four housing starts estimated for this year have been planned for autumn, but they are still completely dependent on wishes, according to the housing production survey carried out by Rakennusteollisuus RT to its member companies at the end of May.
Homebuilders' estimates of their housing starts this year have fallen by less than half compared to the survey conducted in January. In owner-occupied housing, the drop is proportionally even greater than in self-financed rental housing.
"The hopes are now focused on autumn, but there is no cover for them for now. The rapid rise in interest rates has paralyzed the entire real estate sector, even though the situation in the rest of the economy is calmer", Chief Economist of Rakennusteollisuus RT Jouni Vihmo says.
Construction industry RT's housing production survey maps completed and planned free-financed apartment building projects. The respondents are Finland's largest apartment builders and a number of established, smaller apartment builders. According to Jouni Vihmo, the situation for other apartment builders is probably even more difficult due to challenges related to the availability of financing.
According to the construction companies, insufficient demand was now the most significant factor hindering the start of housing production: as many as 97 percent of the respondents felt that it hindered a lot. In addition, all respondents were of the opinion that expectations of interest rate increases are a big or at least a bit of a hindrance. In winter, the increase in construction costs was seen as the biggest obstacle.
The sale of new apartments has decreased by 70 percent in the beginning of the year compared to last year. There are still plenty of apartments being completed before autumn, and there are more new, ready-made apartments for sale now than before. However, due to the small number of starts, new apartments under construction will be sold even less. It is a good thing from the point of view of risk management for construction companies, but it means a shortage of housing supply at the point when demand starts to recover in time.
"The need for new apartments has not disappeared. Continued lively urbanization and strong household income growth will support the demand for apartments in the next few years. Housing production falling too low would be reflected in the price of housing and would become a bottleneck for the entire economy," says Vihmo.
Now is the time to react
"Looking at the results of the survey, it is happening that the total number of housing starts in Finland this year will not even reach 20 apartments. In addition to non-profit high-rise apartments, small house projects have decreased and state-subsidized rental housing production is far from its target level", CEO of Rakennusteollisuus RT Aleksi Randell toteaa.
Last year there were 38 starts, and according to VTT's calculations, the long-term average housing production need is 000 apartments annually.
Housing production Alho puts a strong negative pressure on the entire construction industry and starts to weaken construction employment more noticeably after the summer. The effects on the entire economy last for a long time.
"The seriousness of the situation does not seem to be understood. The negative cycle must be corrected, and the state must immediately ensure that even subsidized rental housing production can be launched. It requires, for example, flexibility with regard to significantly increased costs and the rapid introduction of interest subsidy models that work in this exceptional time. These changes require political decisions", Randell sends greetings to the government negotiations.
Additional information
- Jouni Vihmo, chief economist, tel. 050 520 1636
- Aleksi Randell, CEO, tel. 0400 500 822
- Merja Vuoripuro, director of communications, tel. 040 587 2642