The beginning of the year disappointed expectations and construction production has been weaker than expected. This year's growth is only slightly above zero. A stronger recovery is expected in 2027 at the earliest, but there are no guarantees of growth for now.
Zero economic growth and weak consumer confidence have frozen the budding recovery in construction. In its autumn economic review, the Construction Industry Association (RT) lowers its forecasts for this year and next. This year, growth will be less than one percent, and next year, growth is expected to be around 3,5 percent.
There is no clear turnaround in new home construction, and especially in housing production. Starts and new building permits have remained in the red.
The recovering housing market does not yet support new construction
Apartment building production has been focused on rental housing on both sides of the turn of the decade. The construction of privately financed rental housing has been almost at a standstill in recent years, and professional investor demand is at a low point. Now, state-subsidized housing production is also declining sharply. In total, subsidized production is shrinking by as much as 7,000 apartments from 2024 to 2027, which means about 70 percent.
This year, the total number of housing starts is estimated to remain at a very low level, similar to the previous two years, at less than 18,000 units. The 20,000 units forecast for next year are still far from the housing need, but even that requires that publicly financed housing production doubles from this year in order to compensate for the decrease in subsidized production.
"The housing market recovery is still incomplete. Although the sale of old homes and mortgage lending have picked up, the prices of old homes are still falling. The economic conditions for privately financed production are not met in a declining market," Chief Economist of the Construction Industry Federation RT Jouni Vihmo says.
There is a possibility of a rapid turnaround in the housing market if household demand starts to grow as purchasing power improves and pent-up demand is released. However, this will be reflected in new construction with a delay, although the number of new homes ready for sale is no longer holding back starts outside the capital region.
The entire economy would benefit from more balanced housing construction
Residential construction investments in Finland have contracted three times more in the current recession than on average elsewhere in Europe.
"Residential construction movements strengthen the economic cycles of the entire economy. The slower-than-expected growth of the Finnish economy is largely due to the downturn in the housing market and construction. With proactive housing policy and timely actions, social decision-makers could also more effectively smooth out cyclical fluctuations," CEO of the Finnish Construction Industry Federation RT Aleksi Randell toteaa.
"To get out of the current economic crisis, a common situational picture and confidence-building measures are needed to get the housing market and construction off to a good start," says Randell.
Clean transition investments are starting to materialize in construction
The sluggish real estate market and the lack of domestic capital are holding back commercial construction. Clean transition investments are gradually starting to be seen in the work of both building and infrastructure builders. They will increase civil engineering this year. Railway construction is also gaining new momentum, especially from tram projects. Civil engineering will grow by four percent this year.
In the infrastructure sector, the current government has invested in road maintenance with a repair debt package. On the other hand, building maintenance is burdened by a lack of funding. Repair construction has decreased for nine consecutive quarters, when it normally has progressed on a steady growth trajectory. There are economic and financial challenges in repair projects for households, housing companies and business premises.
"Renovations will not be carried out or their scope will have to be reduced to the bare minimum. For example, the number of projects aimed at improving energy efficiency will decrease even further, even though there is a great need for them to reduce energy consumption and emissions," says Jouni Vihmo.
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Jouni Vihmo
Chief Economist
jouni.vihmo@rt.fi + 358 50 520 1636Confederation of Finnish Construction Industries (CFCI)
Aleksi Randell
CEO
aleksi.randell@rt.fi + 358 9 129 9201Confederation of Finnish Construction Industries (CFCI)
Assistant: Lotta Räty
Merja Vuoripuro
Director, Communications and Responsibility
merja.vuoripuro@rt.fi + 358 40 587 2642Confederation of Finnish Construction Industries (CFCI)