Source: SRV’s January-December 2024 Financial Statement Release published on 6 February 2025
According to the Bank of Finland’s forecast in December, Finland’s GDP contracted by 0.5 per cent in 2024. The recovery of the Finnish economy gained momentum in the latter part of the year and it is expected that the economy will grow by 0.8 per cent in 2025 and by 1.8 per cent in 2026. Consumer confidence and real incomes remain weak, but the slowdown in inflation and declining interest rates gradually improved the purchasing power of wage earners in 2024. Private consumption has recovered little by little, but many households are still on a cautious footing (source: Bank of Finland). According to Statistics Finland, the weak economic climate has increased the unemployment rate. The Bank of Finland expects the employment situation to pick up when the economy starts to grow. The weak trend in investment continued during 2024, especially in housing construction. Exports picked up in the latter part of the year, and exports will swing to growth in 2025 on the heels of rising activity in global industrial production. A significant deficit in public finances will persist over the next few years and the public debt ratio will continue to rise in spite of adjustment measures. There are risks that trends in the global economy could be less favourable (source: Statistics Finland and Bank of Finland). Economic growth in the eurozone remained muted in 2024, but inflation has clearly slowed down year-on-year. The European Central Bank (ECB) forecasts that total inflation will be 2.5 per cent in 2024, 2.2 per cent in 2025, and 1.9 per cent in 2026. Inflation has been slowed down especially by the decline in energy prices and the ending of the growth in food prices. The ECB’s Governing Council has implemented several interest rate rises since July 2022 in an endeavour to ensure that inflation returns to its two per cent target. At the beginning of 2024, the key interest rate was 4.00 per cent. The ECB’s Governing Council decided to cut the key interest rate by 0.25 percentage points at its meetings in June, September, October and December, and lowered the deposit interest rate to 3.00 per cent. Market interest rates headed downward throughout the year, and the financial markets expect rates to keep declining steadily until autumn 2025 (source: Bank of Finland). The balance figure for the consumer confidence indicator was -9.1 in January 2024 and improved slightly in the second half of the year, amounting to -8.6 in December, compared to -13.3 a year earlier. Consumer confidence remains low, as the long-term average for the indicator is -2.6. Consumers’ assessments of both their current financial situation and their expectations for the future were poor during the year. The outlook for unemployment remained gloomy, and many people felt that the threat of unemployment was also relatively high for them personally (source: Statistics Finland). In 2024, construction volume decreased by approximately 7 per cent. Demand for consumer and investor projects remains poor. Sales of new homes are still low, and the large number of completed homes is keeping many new housing projects on hold. Although an increase in government support mitigated the decline in housing construction in 2024, this support will almost halve this year. In 2024, an estimated 17,000 residential units were started up and the Confederation of Finnish Construction Industries forecasts that in 2025 this figure will rise to 20,000 units if the number of market-financed housing startups begins to grow. The trend in the number of permits issued for business construction was also weak throughout 2024, and the outlook for the next few years is muted. Public construction was in full swing in 2024, with several major projects underway. The outlook for industrial and commercial buildings is reasonable, but there is still a risk that projects might be delayed. On the other hand, there are many candidate projects and things may pick up as financing conditions become more favourable and foreign investors start taking a renewed interest in Finland (source: Confederation of Finnish Construction Industries RT). In 2024, property transactions remained at a historical low, with only EUR 2.2 billion in real estate deals signed during the year. Foreign investors accounted for about half of the transactions. The premises that were in the highest demand during the year were industrial properties (about 31% of transactions), and housing was second (26%). Higher return requirements combined with falling market rates of interest will create a foundation for the gradual normalisation of the transaction market. (source: KTI)
SRV’s view of the market situation and its impact on the company’s operations is that the market situation for private-sector projects will remain challenging in the near future. The geopolitical situation and the threat of trade wars are adding to the uncertainty surrounding inflation and interest rates in particular. The recent fall in interest rates has already created better prerequisites for new projects in all segments, but the yield requirements of investors are still relatively high in the case of both housing and various kinds of business premises projects. Consumer demand for housing is recovering gradually, but remains low. In addition to low demand, the preconditions for starting up new residential projects are also weakened by the large supply of new and newish homes on the market. On the other hand, construction costs have slightly decreased, which is having a positive effect on start-up preconditions. In business premises construction, public sector demand supports volumes, but the limited demand from real estate investors is largely weighted towards existing properties rather than development projects.
SRV’s January-December 2024 Financial Statement Release published on 6 February 2025