Worrying signal for Finnish economy in 2019: Building permits slump

The volume of permits for apartment buildings plunged by more than half, a likely harbinger of an economic slowdown next year.

Construction work for the Tripla complex in Helsinki's Pasila district. Image: Jyrki Lyytikkä / Yle

An exceptionally low number of new construction permits were granted from June to September, says Statistics Finland. Volume was down by 25.4 percent from a year earlier. 

The biggest drop was in commercial and office buildings, where volume plunged by nearly 44 percent. On the residential side, the slide was 37.5 percent compared to the third quarter of 2017. The cubic volume of permits for residential blocks of flats fell by more than half.

Far fewer apartments than last spring

In July to September this year, ongoing building production was still on the up and up, rising by nearly two percent from the same period of 2017. Most of that was in the residential sector, where construction rose by almost four percent – while other construction basically remained at last year’s pace.

New building starts already showed a sharp volume drop of nearly 21 percent though. Residential building starts were down by nine percent.

Construction permits were issued for less than 5,500 flats in the third quarter, down to close to 15,000 from April to June.

On Monday the Research Institute of the Finnish Economy (Etla) predicted that the construction sector would be hit with a downturn next year. The institute predicted that nearly 15 percent fewer new housing construction projects will be started in 2019 compared to this year. Meanwhile hydraulic engineering efforts such as dredging, digging new water channels and construction-related excavations have also seen lagging growth.

Back to 2015 "normal"

Sami Pakarinen, chief economist at the Confederation of Finnish Construction Industries (RT), tells Yle that the Statistics Finland figures indicate that growth in the building trade has peaked and that the sector is returning to normal levels.

Pakarinen defines “normal” as the situation in 2015, when new construction permits were issued at a rate of 30 million cubic metres annually. He notes that the current annual level is around 38 million cubic metres.

The RT forecasts that the number of building permits will decline next year, but still remain at relatively high level in historical terms, he says.

According to Pakarinen, the downturn in permits is a signal that Finland’s overall economic growth will slow next year.

Cheaper flats in October

Meanwhile Statistics Finland said on Thursday that housing prices declined slightly in most areas in October.

The cost of older flats in housing companies dipped by 1.3 percent in the capital region and 0.8 percent elsewhere compared to September.

In Espoo prices fell by 3.7 percent, while in Tampere and Turku they went up by more than three percent.

Year-on-year, prices in the Helsinki region climbed by three percent but slipped by two percent elsewhere.

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