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Business cycles in the construction sector (RAKSU) group:
Good economic cycle of construction is coming to an end – production will fall this and next year

Ministry of Finance
Publication date 14.10.2019 11.00
News item

Construction production will remain this year close to its current level or decrease by at most two per cent from one year back, assesses the business cycles in the construction sector (RAKSU) group in its report published on 14 October. Next year, construction production will fall by 1.5–3.5 per cent.

A large number of new construction projects were started in the first half of 2019. Construction will continue brisk in the latter half of the year. However, the number of new construction projects has gradually fallen, because the number of building permits granted has decreased. Continued economic growth and low interest rates sustain the demand for construction. There is no sudden reduction in the number of construction projects in view.

The construction of new blocks of flats is expected to decline fast, because building permits granted for blocks of flats have decreased during January to July by almost 20 per cent. The number of building starts is returning to sustainable demand. The RAKSU group assesses that construction will start on 37,000–38,000 dwellings in 2019. In 2020, there will be thousands fewer new dwelling construction starts.

The construction of production facilities is also expected to decline this year. Building permits for production facilities have fallen by just under ten per cent in January to July. An exception to this is manufacturing, which invests actively in the current year. The construction of buildings for institutional care and assembly buildings is also busy. Assembly buildings include e.g. sports buildings.

The general trend of increasing renovation building has slowed down clearly in the last few years. The RAKSU group predicts that renovation will grow by around 1.5 per cent in the next few years. Civil engineering is also estimated to grow both this year and next year as public sector projects increase.

The price development of construction is expected to level off as the number of construction projects to be started falls. The rise in the costs of infrastructure construction has also slowed down, particularly due to the fall in the price of oil.

The RAKSU group assesses that employment in the construction sector will fall during next year as construction production decreases.

Construction 2019–2020 (in Finnish)

Inquiries:

Sari Sontag, Senior Ministerial Adviser, tel. +358 2955 30181, sari.sontag(at)vm.fi

The business cycles in the construction sector (RAKSU) group led by the Ministry of Finance assesses the development of economic cycles in building construction, infrastructure construction and renovation. The reports of the RAKSU group examine the trends in the sector at the national level and, in part, at the regional level. In the reports, the situation is examined from the perspectives of volumes, prices, costs, financing, employment rates and the market for construction materials. The RAKSU group studies structural questions and needs for change in the construction sector over the long term. The group also gives recommendations on securing balanced development in the construction sector.

 
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