Outlook for construction
The uncertain situation in the global economy in 2008 also hit the const ruction industry. This can be seen in the slowdown of the growth of the construction of business premises and slump in housing construction. The Baltic countries are in recession, too. However, Russia presents many opportunities in the long term.
The financial crisis stemming from the United States penetrated the global economy last autumn, pushing economic trends downwards more than expected, including in Finland. Rapid economic growth gave way to uncertainty and a lack of confidence, making forecasting very difficult. The US and the euro area passed their economic peaks and the world economy is currently preparing for a period of slower growth.
Last year, the Finnish economy grew at an estimated annual rate of 1.5 per cent. For 2009, it is predicted that economic growth will almost come to a halt and even to turn negative. The construction business already peaked in 2007, when the growth rate in construction volumes attained a 7.1 per cent high. In 2009 construction and the property market are expected to see a marked decline from their peak periods.
The long, powerful economic boom resulted in record figures for the investment and construction markets, while construction costs kept rising and the availability of materials dwindled. However, the forthcoming period of slower growth will bring construction costs down, encouraging the initiation of new projects. The supply of construction materials and labour is expected to improve further.
Business premises
In 2008, construction of office premises remained strong and, since a record number of new premises will be completed in 2009, vacancy rates will also rise. Office and business construction is expected to reduce in 2009, but not to dip below the average level prevailing prior to the economic peak.
Prudence and delayed decision-making increased in the property market towards the end of 2008. Rents are expected to decrease, particularly outside the Helsinki Metropolitan Area. Last year logistics construction was lively in ports and alongside new routes, but near future economic uncertainties are delaying new projects.
Housing
In 2008, consumer confidence in household economies declined and the financial crisis pushed interest rates upwards, cooling the housing market rapidly. The number of completed but unsold residential units has increased and selling times have become longer. Construction of new residential units reduced throughout the financial year, and this decline is expected to continue in 2009. Demand for one-family houses and terraced houses, in particular, has decreased. Furthermore, the rise in housing prices, which had been continuing for years, slowed down towards the end of 2008. Demand for housing is, however, being maintained by internal migration and the concentration of the population in growth centres and their neighbouring municipalities. Also the rapid decrease in interest rates, which started towards the end of 2008, perks up the residential market.
Baltic countries
The Baltic economies weakened rapidly due to the financial crisis, and the high growth trends of recent years are being replaced by those of reducing GDPs. It is estimated that Estonian GDP fell by 2.2 per cent in 2008 and it is expected to decline further in 2009.
The prices of properties and housing in the Baltic countries fell last year. Economic growth saw just as abrupt a halt in Latvia as in Estonia. The country's GDP is predicted to decrease notably in 2009. Once the Baltic economy begins to recover, new construction and the property market are also expected to pick up.
Russia
Russian GDP is estimated to have grown by six per cent in 2008. It is forecast that in 2009 growth will slow down to slightly under or over zero per cent. The financial crisis hit Russia hard during the third quarter of 2008, hindering credit granting and markedly decelerating economic growth. The Russian economy will be highly dependent on oil market prices, since 65-70 per cent of the nation's export revenues derive from energy, chiefly oil. Construction grew by about 13 percent in 2008, even though it lost almost all of its momentum in the third quarter. The Russian middle class continued to became wealthier, and the growth in retail trade boosted the construction of new shopping centres and logistics premises. While in the near-future Russia will see disrupted markets, in the long term the country will present plenty of interesting opportunities for the property business.