Workers at a construction site in Helsinki. Construction is also contracting this year – a small growth is predicted for next year. LEHTIKUVA
- Next Article Rare moose parasite found in Finnish dog’s lungs for the first time
The Finnish construction industry continues to struggle, with privately financed housing production remaining at a standstill and new residential building projects declining by 19% in early 2023. While modest growth of 4% is projected for the industry next year, this improvement stems largely from weak comparison figures and does not signal a full recovery, according to the latest report from the Confederation of Finnish Construction Industries (RT).
In 2022, the construction sector experienced a historic contraction of 16% compared to the previous year. This year, the decline is expected to slow, with the industry shrinking by 7%, RT’s autumn economic outlook reveals.
“Despite some positive economic indicators, such as slowing inflation and lower interest rates boosting consumer purchasing power, there’s still not enough momentum in the Finnish economy to fuel a real turnaround in construction,” said Jouni Vihmo, RT’s chief economist.
While there are signs of recovery in the housing market, demand from both consumers and investors is largely focused on existing homes. The construction of new residential properties remains hampered by several factors, including tighter financing conditions and slow sales of newly built homes.
RT estimates that only 17,000 new housing projects will begin this year, a slight decrease from last year’s historically low figures. Although government-subsidized housing production has somewhat cushioned the blow, overall housing construction volume has fallen by 60% over the past two years.
“We expect only weak growth next year, as government-subsidized housing production is set to halve, and privately financed projects have yet to show significant recovery,” Vihmo added.
The reduction in government-subsidized housing comes at an unfortunate time, according to RT’s CEO, Aleksi Randell.
“There have been several government decisions that will reduce subsidized housing production. The assumption was that privately financed housing would pick up, but that’s not happening. This drop is ill-timed, and we need to ensure that the financial support for subsidized housing is increased for 2025-2026. Decisions must be made early to prevent further damage,” Randell emphasized.
The downturn in commercial property construction continues, driven by a lackluster real estate market. Public sector projects, particularly from municipalities, have kept construction activity afloat, taking advantage of lower costs and available capacity.
Like new construction, the renovation sector has been hit hard by rising interest rates and costs, along with tighter lending policies, especially outside growth areas. Renovation activity fell by 5% last year and by 12% in the first half of 2023. Growth of just 1% is anticipated for next year.
On a more positive note, infrastructure construction is expected to grow in 2024, driven by government investments in transportation and energy-related projects.
Despite some signs of improvement, the overall recovery in the construction industry will remain slow over the coming years, with production levels far below what they were in the past. Employment in the sector is also expected to decline well into next year.
HT
- Next Article Rare moose parasite found in Finnish dog’s lungs for the first time
Source: www.helsinkitimes.fi
