In 2019, the growth of the global economy will slow down compared with last year. This slowdown is largely due to, among other things, the trade conflict between the USA and China, which has also led to slower growth in global trade.
The outlook for the eurozone weakened last year. During the first quarter of the present year, however, the economic growth rate surpassed expectations in many European economies. Domestic demand maintains growth in key economies, even though the outlook for exports is more modest. In the years ahead, Finnish economic growth will be more restrained than in earlier years. The economy will grow by 1.6 per cent in 2019. The outlook for Finland’s most important export markets has weakened, even though demand for exports will pick up the pace again from next year onwards. In 2020, economic growth will slacken to 1.2 per cent. (Ministry of Finance: 17 June 2019)
Construction will decrease both this year and the next, while the rest of the economy will continue to grow. During the current year, start-ups of building construction works will decline from their level in the two previous years, about 40 million cubic metres, to under 38 million cubic metres. Next year, construction volume will amount to less than 36 million cubic metres. (Business cycle review by the Confederation of Finnish Construction Industries RT, 1/2019.)
Urbanisation and population shift are still the general drivers of construction and will maintain the need for both housing and business construction in growth centres, which are SRV’s strategic focal points. According to VTT’s forecast, urbanisation will continue, as Finland’s urbanisation ratio is clearly lagging behind other industrialised nations, such as Sweden. For example, the Helsinki region’s 14 municipalities have made a joint MAL Plan. The plan’s target state is for the Helsinki region to have two million residents and more than a million jobs by 2050. This would mean about 500,000 more residents and 300,000 more jobs than in 2018. (Sources: Helsinki Region Trends 1/2019 & VTT’s Demand for Housing Production, 2015–2040, 01/2016).
Construction of new housing has been at a record high in recent years, especially in the Greater Helsinki Area and other large cities such as Tampere and Turku. Housing construction is expected to slow down this year, with start-ups in Finland declining from last year’s level of about 46,000 residential units to around 39,000. (Business cycle review by the Confederation of Finnish Construction Industries RT, 1/2019.)
In commercial construction, start-ups of projects other than public-sector service buildings and industrial buildings will fall this year. Construction of healthcare buildings and schools remains brisk. Renovation construction is expected to grow by about 1.8 per cent this year. Civil engineering investments are forecast to decline by around 3 per cent. According to Statistics Finland, construction costs have risen by 1.2 per cent compared with May 2018. The prices of supplies in particular have risen over the past 12 months. (Source: Business cycle review by the Confederation of Finnish Construction Industries RT, 1/2019, Statistics Finland, Building Cost Index.)
Investors are maintaining a good level of interest in projects in Finnish growth centres. The transaction volume in the property market totalled EUR 9.3 billion in 2018. Office properties accounted for about EUR 3.6 billion, commercial properties for about EUR 2.2 billion, and residential properties for about EUR 1.8 billion. International investors in particular showed a great deal of interest in the Finnish market, with international investors accounting for about 66 per cent of transaction volume. Apartments have become an increasingly attractive class of property investment in recent years, and interest remains high. (Source: KTI market review)
The Russian economy has continued to grow slowly. A dearth of investments and weak consumer demand will continue to hamper economic growth in Russia over the coming years. The Bank of Finland Institute for Economies in Transition (BOFIT) forecasts economic growth of about 1.5 per cent in Russia over the next few years. The major forecast risks are still posed by changes in the price of oil and the weaker-than-expected development of the outlook for the global economy and international relations. An increase in government budgetary expenditure might lead to a higher-than-expected rate of GDP growth during the forecast period. (Source: The Bank of Finland Institute for Economies in Transition (BOFIT), 15 March 2019.)
Half-year report 1-6/2019, 17 July 2019