RAKSU forecasts slow construction growth next year

Finland’s construction growth rate will slow considerably in 2019, particularly as a result of a decrease in housing construction, according to a report published on Thursday by the working group on business cycles in the construction sector (RAKSU group).

The full-year growth rate forecast for 2018 was revised upwards. The RAKSU group expects construction output as a whole to be up by 3–4% this year and the output level in 2019 to remain close to this year’s figure.

The forecast for construction growth in 2019 is in the range 1% to –1%.

The cubic metre volume of all building permits granted in the first six months of this year was down by 10% from the same period last year. Permits granted for housing were down by 12%. This turnaround in the permit figures signals a slow-down in construction. The RAKSU group’s forecast for housing starts this year is 42,000–44,000 units, and for 2019 a few thousand less than this.

Renovation and infrastructure construction will continue to grow, though at a slower rate. Growth in civil engineering works will be minor because the present Government’s investment in key projects will end as the government term draws to a close. Construction work on healthcare and school buildings is expected to pick up again.

Although inflation is at very modest levels, investment costs in the construction sector are already rising at an annual rate of almost 5%. Construction costs have also increased. In July–August, these were up by almost 3% compared with the same period a year earlier.

According to figures from Statistics Finland, the unemployment rate in the construction sector fell to 6.3% in the second quarter of 2018 and is significantly lower than the general rate of unemployment.

At the same time, the number of vacancies in the construction sector rose to 6,400. A shortage of skilled labour is now considered the biggest obstacle to growth.