Outlook for construction

The recovery of the world economy has continued, but it is unstable. The expected growth of the Finnish economy is 4 per cent in 2011.

The start-ups of building construction are predicted to increase around 4% this year. The total number of building permits went down in early 2011. Construction cost index is in clear upswing. Employment in construction will somewhat improve this year.

Strong consumer confidence and low interest rates fuel demand leves

Strong consumer confidence and interest rates that are low for now have kept demand at a decent level in the housing market. Start-ups this year equal the long term annual housing needs, i.e. around 34,000 housing units. On a longer perspective, the need for residential construction is sustained for instance by migration to growth centres and smaller households. However, the growth in demand is estimated to slow down. Moreover, prevailing economic situation and employment rate as well as higher interest rates create uncertainties in the housing sales.

Weak employment trends, increased interest rates, or disruptions in the global economy caused by crises may have negative short-term effects on the housing market. In the longer term, trends such as migration to population growth centres and the smaller size of households will increase the need for housing construction.

Slight increase in commercial and office building start-ups this year

Commercial and office real-estate markets remained low and the vacancy rates of office spaces are particularly high. This year slightly more commercial and office buildings will be started than last year, but the number is estimated to go down slightly again next year.

Call for renovation continues to be good this year. The growth of the building stock, its ageing and the modernization of technical standards will maintain the volume of renovation works in years to come. The weakening of the outlook for civil engineering construction will even out next year when the ongoing infrastructure projects start to affect.

Baltic economy strengthens

The economy in the Baltic countries is estimated to strengthen this year. The accelerated inflation may jeopardise the development of domestic demand in Estonia and Lithuania, in particular. Activity in the construction sector and real-estate market remains at a low level.

Growth of the Russian economy continues

The Russian economy has turned into a slow growth. GNP is estimated to grow around 5.5% in 2011 as private consumption accelerates the recovery. The changes in oil price estimates is predicted to increase the governments income by nearly 20% more than budgeted. Inflation has gobbled up the growth of real wages. Investment activity is expected to revive in the real-estate market in 2011.

2 November 2011