Source: SRV’s January-September 2024 Interim Report, published on 24 October 2024
According to the Bank of Finland’s forecast, Finland’s GDP will contract by 0.5 per cent this year. However, the economy is gradually recovering from the recession with growth of 1.1 per cent and 1.8 per cent expected in 2025 and 2026. Consumer confidence and real incomes remain weak, but the slowdown in inflation and declining interest rates will gradually improve the purchasing power of wage earners. Private consumption is recovering little by little, but many households are still on a cautious footing. The unemployment rate has risen, but will decrease over the coming year as the economy improves. Exports will swing to growth in 2025 thanks to a pickup 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: Bank of Finland).
The eurozone’s economy has been growing this year, and inflation has recently been falling towards the central banks’ target of two per cent. In June and September, the General Council of the European Central Bank decided to reduce its key interest rate by 25 interest points. The market expects that interest rates will continue to fall. The three-month Euribor is expected to stabilise at 2.5 per cent in 2026. (source: Bank of Finland)
Consumer confidence remained low in September 2024. According to Statistics Finland, the balance figure for the consumer confidence indicator was -8.1 in September, compared to -7.2 in both July and August. Although confidence remains low, the figures for early autumn 2024 are better than they were last autumn. Consumers’ assessments of both their current financial situation and their expectations for the future were very poor. 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)
The construction sector as a whole is expected to contract by 7 per cent this year, putting construction volumes at an historic low. Although construction will recover from this all-time low next year, no upswing is currently close at hand. Demand for consumer and investor projects remains poor. Although an increase in government support has mitigated the decline in housing construction, this support will almost halve next year. Sales of new homes remain low, and the large number of completed homes is keeping many new housing projects on hold. It is estimated that 17,000 units will be started in 2024, and that this figure will increase to 20,000 in 2025. The trend in the number of permits issued for business construction has also been weak, and the outlook for the next few years is muted. Public construction is now in full swing, with several major projects underway. The outlook for industrial and commercial buildings is reasonable, but there is 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).
2024 has been a difficult year for property sales, and real estate transactions totalled only EUR 1.3 billion during the first half of the year, about half of which was accounted for by foreign investors. Housing portfolios were once again the most popular type of premises, accounting for 38 per cent of sales. The next-most traded type were industrial properties at 31 per cent. 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 current market situation and its impact on the company’s operations is that the market situation for private-sector projects will remain challenging. Although interest rates are falling, they remain relatively high. High interest rates have a strong negative impact on demand among both private homebuyers and investors. The high market supply of completed new units is also making it more difficult to start up new housing projects. On the other hand, construction costs have slightly decreased, which is having a positive effect on start-up preconditions. Public-sector demand is supporting volumes in business premises construction, but private-sector demand remains low. The limited demand from real estate investors is largely weighted towards existing properties rather than development projects.
January-September 2024 Interim Report, published on 24 October 2024