Overall construction activity
In 2023 the total volume of construction collapsed by 11 percent. New building construction reduced heavily as new residential construction kept declining at a faster pace than in the financial crises 2008-2009. New non-residential construction also decreased by 5 per cent. Renovation and investments in civil engineering suffered from still ongoing rising costs development.
Finland’s economy declined 1 percent in 2023. The collapse of construction was solely responsible for the economic downturn in Finland last year.
The construction crisis continues 2024. Historically rapid increase in costs and interest rates, tighter credit policy and financial regulation have reduced the leeway and funding of construction companies to almost non-existent. In addition, the housing market has been paralysed by domestic special features.
Housing production is expected to stay at historically low level. Non-residential construction is estimated to increase by 1 per cent. The expected industrial investment boom connected to the green transition is not visible in construction statistics, at least not yet. The volume of civil engineering is expected to decrease in 2024 by 2 per cent. Decline in the volume of renovation continues in 2024. In 2024 total construction output is expected to decrease still by 5 per cent even after heavy decline in 2023.
Considering the decreasing level of activity sector employment will decrease. Employment in construction averaged 220,000 people in 2022 according to national account. In 2023 employment reduced to 195 000. The average unemployment rate in the construction sector increased to 12 per cent by the end of the year. Employment in construction sector is expected to decrease in 2024.
Housebuilding
The number of new housing starts halved to 18 000 in 2023. The prices of old dwellings have decreased rapidly in 2023 and 2024 all over Finland in Helsinki region and other urban parts in Finland. Rent development has been positive, but very modest compared to general cost development. Record low sales in housing market throughout 2023 and 2024, the ongoing uncertainty of the interest rate level and the low level of consumer confidence will keep new building activity at a low level also in 2024. In 2024 the number of new starts is still expected to decrease modestly. The collapse in 2023 will reduce ongoing new production considerably even this year.
Renovation has increased steadily in Finland in recent decades. In 2023 the sector was hit by rising costs more even heavier than the new building and growth was negative by 4 per cent measured in constant prices. The pace is not expected to pick up until in 2025.
Non-residential construction
Non-residential construction has been affected by rising construction and financing costs. The adaptation to changed financing conditions is still incomplete. We expect only a modest 1 per cent growth for the sector in 2024. The industrial investment boom connected to the green transition is expected to boost construction in the coming years but is not yet visible in construction statistics. Public sector, commercial buildings and warehouses are the main drivers in 2024 so far.
Overall, we expect the volume of non-residential construction to grow modestly this year. Because of the continuing decline in residential building and renovation, the non-residential construction is the main driver in housebuilding this year.
GDP 2023
BILLION
POPULATION 2023
Total investment in construction in 2023
BILLION
Civil engineering
The civil engineering sector decreased by 5 percent in 2023 because of the continuing heavy cost increase. The volume is expected to decrease by 2 this year. Transportation and housing will boost growth next year. Costs will continue to calm down. Needs in the security of supply and government investment program are expected to increase civil engineering in Finland in the coming years.
Prices of construction materials
Construction material price index has risen sharply in the last couple of years. Especially after the war In Ukraine it has contributed to lower the demand and uncertainty in all construction sectors.
In 2023 construction costs increase 3,1 per cent compared to last year. Prices for construction materials have declined since mid-2023 and the overall index was slightly negative in the first quarter of 2024.
We expect the price calm down to continue, but we do expect the prices to decline further.
Prices are likely to remain significantly higher than pre-pandemic levels.
Per cent variation of investment in real terms of previous year
Number of building permits in residential construction
