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Economic trends in construction

The RAKSU group studies trends in construction led by the Ministry of Finance and assesses the development of economic trends in the construction of residential buildings, infrastructure and renovation. The members of the group include key authorities and members of organisations in the field.

Construction is set to decrease from its current high level this year and the next, according to a report released by the RAKSU group (business cycles in the construction sector) on 6 February. The most significant decline will be seen in housing construction, but other construction is also set to decrease. Construction of healthcare and school buildings will, however, remain brisk this year and next.

The total construction output volume is expected to decrease by ½–2½ per cent in 2019 and by a further 1½–3½ per cent in 2020. In 2018, housing construction in particular caused the construction output to increase by an estimated 3½ per cent.

The RAKSU group estimates that construction will begin on 37,000–39,000 new units in 2019. The report forecasts several thousand fewer housing starts in 2020. Last year saw a record number of housing starts for the second year in a row, with the total reaching around 44,000–45,000 units.

New building construction is set to decrease in 2019. The cubic metre volume of all building permits granted last year decreased approximately 10 per cent from the year before. A reasonable number of new building projects were being initiated until almost the end of 2018, so there will be a high volume of stock under construction in early 2019.

The number of renovations is estimated to have grown by around one per cent in 2018 and to grow by around 1½ per cent in 2019. Renovation of residential buildings will increase more briskly than that of other buildings.

Civil engineering works will decrease by 2-3 per cent over the current year, because the Government’s investment in key projects will end as the government term draws to a close. Major civil engineering projects are, however, ongoing: in the Helsinki region, the second phase of the West Metro is currently underway, and construction on the Raide–Jokeri light rail link is set to begin in 2019.

The price of construction investments saw a swift increase last year. The rise in prices was more than double the general inflation rate. The decrease in the number of new projects is expected to be reflected in the form of a slowdown or stagnation in the growth of bid prices. Oil prices are keeping civil engineering costs high. Now, the rise in costs is expected to see a clear drop.

The number of people employed in the construction sector increased to its highest level in the 2000s at the end of 2018, when 208,000 people were employed in the sector in the fourth quarter of the year. The number of people employed in the construction sector is expected to remain at a good level this year and the next. In some areas, a shortage of skilled labour has posed a challenge, and this is now considered the biggest obstacle to output growth.

 

Raksun logo

 

RAKSU group

 

Chair

Ms Sari Sontag              Ministry of Finance

Members

Mr Antti Aarnio

RIA ry

Ms Johanna Alatalo

Ministry of Employment and the Economy

Ms Terhi Heikkonen

Confederation of Finnish Industries EK

Mr Matti Holopainen

Association of Finnish Local and Regional Authorities

Mr Ari Huomo

Finnish Transport Agency

Mr Kimmo Huovinen

The Housing Finance and Development Centre of Finland ARA

Ms Kati Jussila

Ministry of Finance

Mr Heikki Jämsä

INFRA

Mr Jukka Kero

The Finnish Real Estate Federation FREF

Mr Tommi Laanti

Ministry of the Environment

Ms Armi Liinamaa

Ministry of Finance

Mr Eero Nippala

Tampere University of Applied Sciences TAMK

Ms Paula Paavilainen

Statistics Finland

Mr Pekka Pajakkala

Forecon Ltd

Mr Jouni Parkkonen

Association for Advocating Affordable Rental Housing KOVA

Ms Hanna Perälä

Ministry of Transport and Communications

Mr Mark Rantala

Ministry of Finance

Ms Helena Soimakallio

The Finnish Association of Consulting Firms SKOL

Mr Mikko Somersalmi

The Finnish Accociation of Building Owners and Construction Client RAKLI

Mr Hannu Viertola

Bank of Finland

Mr Tuomas Viljamaa

Finnish Landlord Association

 

 

 

 

 

 

 

Contact information

Ms Sari Sontag, Senior Financial Adviser
Ministry of Finance, Economics Department, Macro Forecasting
+358 2955 30181
sari.sontag@vm.fi