The total number of housing starts falls to less than half of last year's, according to the latest business cycle forecast by Rakennusteollisuus RT. No less than 80 percent of the starts of self-financed apartment buildings are down from last year. Due to the collapse of housing production, the number of completed apartments threatens to fall to the level of the 1940s in the next couple of years, and the entire construction will shrink by 10 percent this year.
This year, the construction of only around 16 new apartments will start, while last year the number was more than 000. The rise in interest rates and costs has frozen both consumer and investor demand for new apartments and government-subsidized housing production.
Following the projects started last year, there are still plenty of new apartments available, but the supply will be halved next year.
"The drop in housing supply is poison for the labor market. Scarcity raises the price of housing and weakens people's ability to move and labor mobility. The increase in prices will hit the most indebted households, i.e. families with children and first-time home buyers," Chief Economist of Rakennusteollisuus RT Jouni Vihmo says.
According to Vihmo, the recovery of housing production requires the stabilization of the interest rate outlook, the recovery of the sale of old apartments and the melting of the reserve of new apartments.
Consumer sales of apartments may start to pick up gradually at the beginning of next year, because the need has not disappeared and the basic drivers of consumer demand are in order. Urbanization has continued stronger than predicted and disposable income is growing rapidly. So far, there are no financial prerequisites for a significant recovery in investor demand. In recent years, up to 60–70 percent of production has been investor-oriented.
The number of starts for single-family houses is also falling by half. Due to the exceptionally low housing starts, all new house construction starts will shrink to less than 30 million cubic meters this year, while the average level has been around 40. The volume of residential construction will decrease strongly next year, which is why Rakennusteollisuus RT predicts that the entire construction will remain in the red by 2 percent.
Sufficient supply of apartments must be taken care of
Construction has supported economic growth for almost ten years, but now housing construction Alho is showing the development of the entire economy and employment. Employment in construction will fall to 160, which means that the growth of the entire boom period, 000–20 jobs, will soon have melted away. Due to the project nature, unemployment in construction rises more sensitively in crises than in the rest of the economy.
"Economic problems stemming from the housing market and construction have generally proven to have wide-ranging and long-lasting effects. Therefore, it would be important to break the negative cycle as quickly as possible", CEO of Rakennusteollisuus RT Aleksi Randell toteaa.
Randell describes the quick, specific measures decided by the government in the budget rush to speed up housing construction as being in the right direction, but uncertain in their effects. Their effectiveness largely depends on how quickly and well they can now be concretized and put into use.
"Increasing the maximum amount of the ASP interest subsidy loan for housing savings hits the right spot, because due to the decreased house prices, now is a good time to buy a first home. However, it immediately benefits only those ASP savers who already meet the conditions for obtaining a loan, such as the two-year minimum savings period," says Aleksi Randell.
By successfully speeding up Ara's processes and flexible terms, state-supported housing production can rise to 8 apartments next year, which is still below the level of Ara's goals and funding granting powers in recent years. Better things can only be achieved by reforming the terms of the short-term interest subsidy loan so that, in this exceptional situation, it is possible for apartment investors to get the bank financing required to start production.
"The need for rental apartments in the coming years has not disappeared anywhere, but rather it will grow proportionally when the Finnish economy can be turned to growth again", reminds Aleksi Randell.
In order to strengthen the economy and housing demand, next year the government will launch transport projects worth a good half a billion euros and speed up infrastructure and housing construction in large urban areas through MAL agreements. Randell considers the totality of infrastructure investments to be the most important part of the budget tussle.
"As far as repair construction is concerned, the budget tussle was a big disappointment. Renovation construction, which usually grew steadily, has slipped to a four percent decline this year. With cyclical support for repair projects of households and housing associations, builders could be employed, the building repair deficit could be fixed, and we could prepare for stricter energy efficiency requirements."
Materials
The business cycle review with attached materials can be found on RT's website www.rt.fi/suhdanteet
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
See also
The government's actions to lift construction from the recession are in the right direction (Notice 19.9.2023 September XNUMX) https://www.rt.fi/Ajankohtaista/Tiedotteet1/2023/hallituksen-toimet-rakentamisen-nostamiseksi-suhdannekuopasta-ovat-oikeansuuntaisia/
The protracted economic crisis in construction requires quick action - RT expects decisions on the budget crisis (Notice 12.9.2023 September XNUMX) https://www.rt.fi/Ajankohtaista/Tiedotteet1/2023/rakentamisen-pitkittyva-suhdannekriisi-edellyttaa-nopeita-toimia—rt-odottaa-budjettiriihesta-paatoksia/