Insight into Construction in Estonia by the European Construction Sector Observatory
The Estonian construction sector has gone through a boom and bust cycle due to the global economic crisis, followed by a period of gradual recovery. Productivity in construction fell by 45.2% between 2008 and 2010, but recovered between 2010 and 2014, with productivity rising to close to pre-crisis levels. Construction turnover declined sharply between 2008 and 2009 (‑31.9%); however, by 2013, it was 4.6% above overall turnover in 2008. Construction costs have also fluctuated, rising steadily up to 2008, followed by a 10.8% decline between 2008 and 2010, before growing again by 14.6% between 2010 and 2015.
The performance of the housing sector has mirrored the up and down trend of the overall economy, recording a boom in the years prior to the economic crisis (2000-2007), falling sharply with the global economic downturn and recovering quickly after the crash. Housing completions fell by 57.2% from the peak of 2007 to 2009 and residential construction remained depressed between 2010 and 2013. However, the housing market began to recover in 2014, and by 2015, housing completions were up 40% compared to the previous year.
The Estonian housing stock consists largely of apartment blocks that are very energy inefficient and are in need of substantial investment to support their renovation. A number of schemes are providing much needed support. The Renovation Loan and Grant Scheme, which includes the Apartment Building Loan Guarantee (Korterelamulaenu käendus) and the Reconstruction Grant (Rekonstrueerimise toetus), is one example. The scheme aims to incentivise apartment and building owners and apartment or housing associations to carry out renovation work in their buildings in order to reduce energy consumption and to improve energy efficiency. Renovation Loans provide long-term low interest loans for the financing of renovation work in apartment buildings. Renovation Grants are designed for associations and communities that wish to reconstruct their apartment buildings as completely as possible. The scheme has helped to increase investment in renovations by 9.5% between 2008 and 2015, from EUR 21.1 million to EUR 23.1 million.
Investment in construction has also experienced significant fluctuations in recent years, but has not yet completely recovered to pre-crisis levels. Total investment in construction declined by 30.7% between 2008 and 2014. Non-residential construction and civil engineering were the sub-sectors that recorded the sharpest fall in investment (-34.0%) compared to 2008. In contrast, investment in residential construction fell sharply between 2008 and 2010, but then began to gradually recover, although it remains 19.4% below the level of investment achieved in 2008.
In conclusion, the Estonian construction sector appears to have overcome the effects of the crisis. The sector is on the path to recovery, as is the overall Estonian economy. Nonetheless, with 20% of Estonian construction SMEs expressing concern for the future, the outlook for the sector is still uncertain.
The European Construction Sector Observatory is helping the construction value chain to confront the economic and social challenges that impact the construction industry. Through regular analysis and comparative assessments, the initiative aims to inform European policymakers and industry stakeholders on the market conditions and policy developments in the European construction sector. The key outputs of the Observatory include Country Fact Sheets that profile and analyse the construction sector in each Member State, Policy Fact Sheets on key sector-related policies in each Member State, and a series of Analytical Reports on the implementation of Construction 2020 Strategy objectives.
Visit the Observatory website to download analytical fact sheets and reports on Estonia and other Member States, and gain insight into the European construction sector.