Construction sector more active in 2020 than expected, to fall in 2021

Construction output for 2020 will be close to the previous year’s level, said the Ministry of Finance in a press release on Thursday, quoting a report of the RAKSU construction trends group published on Wednesday.

The COVID-19 epidemic has affected construction less than had been expected. Construction output was up throughout the first six months of the year, and preliminary data shows that this continued in July, too.

The RAKSU construction trends group, however, expects construction activity to continue to decrease in 2021 as the economic uncertainty and the above-normal output figures return closer to their long-term levels, in both residential construction and public construction projects.

The group estimates that output will be down by between three and five per cent in 2021.

Civil engineering activity, in particular, has grown considerably from the previous year’s level. There were also more new housing starts in the first half of the year than in the same period of 2019.

The restrictions imposed in Finland due to the COVID-19 epidemic are nevertheless reflected in the reduced level of renovations. The restrictions did not have quite such an impact on new construction.

The construction sector’s expectations for the coming autumn and winter are weak, however. The outlook for new-build construction has slumped due to a fall in demand, and there has been a considerable reduction in the number of building permits issued.

The report, however, said that strong recovery measures and low interest rates will help ease the poor outlook. It is also likely that in the next 12 months a COVID-19 vaccine will be found, or at least a form of treatment that alleviates the symptoms. Consequently, it is possible that construction activity will not decrease as much as is now forecast.

Construction output for the full year 2020 is estimated to be close to the 2019 level as, despite the poor outlook, output was still growing in the first six months of the year.

Even if there were to be noticeably fewer construction projects started in the latter part of this year than in the early months, total output would fall only slowly. It is forecast that the change in construction output in 2020 compared with the previous year will be in the range between plus and minus one per cent.

It is estimated that new housing starts will be slightly fewer than previously, both this year and next year. The RAKSU group forecasts that the number of housing starts in 2020 will be 33,000–34,000 units. In 2021, the estimated number of housing starts is 30,000 units.

Renovations were down in the first half of 2020. For the full year, however, renovations are forecast to be up by 0.5 per cent, and by 1.5 per cent in 2021.

Civil engineering activity is forecast to increase this year by between five and six per cent due to strong growth in public investment. Next year, activity is expected to decrease by two per cent.

The number of people employed in the construction sector is expected to fall in 2020 as output decreases.