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Finnish construction sector boom to slow down

The construction industry that boosted the economy and created jobs is headed for a slowdown, a lobby group warns.

Rakennustyömaa Joensuussa.
File photo of residential construction site in Joensuu. Image: Ismo Pekkarinen / AOP

After having grown faster than other sectors and helped to drive the economy upwards for the past four years, Finland's construction sector is set for a slump, according to the Confederation of Finnish Construction Industries (RT).

Construction workers in Finland were busy last year and built more than 46,000 new homes. But the industry is bracing for a decline, with fewer than 40,000 new homes being planned for 2019.

Around 13,000 more flats were built last year than the annual average constructed during the 2000s, but that will not be a trend that continues. Some researchers and experts began to voice concern over that possibility last autumn.

Employment, housing boom set for decline

The decline won't hit construction workers right away, however. The overall number of people in the construction sector this year - some 198,000 - is expected to remain roughly the same as in 2018.

The number of construction employees grew by around 30,000 over the past four years, a development that also helped to raise the country's overall employment figures.

However, the construction sector will likely shed about 5,000 workers in 2020 due to an anticipated two percent decline in the industry, according to the group's Director General, Aleksi Randell.

"The incoming government needs to play their cards right when [the country's] economic growth begins to falter. Conditions need to be created for adequate housing construction and for low-emission rail projects. It's needed because doing so would play a key role in employment development," Randell said.

For some time now the construction sector has enjoyed good conditions, including: low home loan interest rates, strong consumer confidence levels and stable demand from investors.

Even so, RT's chief economist Jouni Vihmo said the not-distant future is not terribly bright for those in the housing construction sector.

"Construction of housing will decrease this and next year by a total of 10,000 homes, compared to the peak figures of 2018," Vihmo said.

However, he noted, the overall state of the housing market will continue to be positive, saying that numbers of new homes on the market are at reasonable levels.

Public, private projects to taper off

RT also anticipates that construction of business and office buildings will decrease to historically low levels.

Now that several major projects have been completed, construction of new non-residential buildings will be limited to a total of less than five million cubic metres.

While that amount may seem expansive at first glance, it hasn't been that low since the end of the last century.

As Finland becomes more urbanised and its population and buildings age, the construction of public buildings - such as hospitals and service facilities - seems likely to fare better than for the private sector.

The construction of several new hospitals and other public buildings are currently in the works, but according to RT, the growth of those kinds of projects will also begin to dry up in the long term.

The anticipated decline in new housing and non-residential construction sectors is also set to hit infrastructure projects, according to the group.

At the same time the budget for traffic construction projects - like motor- and railways - will be about one-fifth lower this year than last.

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