Insight into Construction in Finland by the European Construction Sector Observatory

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Published by Simon Hardiman

The Finnish construction sector was not as affected by the economic crisis as other European countries; however, its performance has closely mirrored the trend of the general economy, characterised by overall stagnation and a double-dip recession in 2009 and 2012. The weakened state of public finances and increasing debt caused a 19.6% decline in construction sector investment between 2008 and 2015. Investment in housing fell by 3.8% and investment in non-residential construction and civil engineering fell by 31.1%. Another related issue is that planning and zoning procedures in Finland are lengthy, overly regulated and restrictive, making it hard to obtain suitable lots for housing and non-residential developments, and further hindering investment. These factors have had a negative impact on productivity (-12.1% between 2008 and 2014) and profitability, with the gross operating surplus of the broad construction sector declining by 4.4% between 2008 and 2013.

The growth of urban areas, the ageing population and low mortgage rates are driving the demand for housing, particularly for smaller and centrally located apartments in urban areas. However, supply is lagging behind due to the limited availability of land, the high cost of construction and burdensome planning and zoning procedures. The Housing Finance and Development Centre of Finland (ARA) plays a fundamental role in the delivery of affordable properties, including age-adapted housing for the older population. The government has also recently introduced several amendments to the Land Use and Building Act to accelerate planning procedures and reduce the regulatory burden.

Decreasing investments are having a negative impact on Finland’s transport infrastructure, resulting in a maintenance backlog worth EUR 2.5 billion. To tackle the issue, additional funding of EUR 600 million has been granted for the period 2016–2018 under the ‘Action plan to reduce the maintenance backlog of transport infrastructure 2016–2018’, on top of other national and EU financing. The expansion of the rail network is the main priority, as well as TEN-T projects.

Finland is a global leader in cleantech, eco-innovation, research and sustainable construction. Funding support is provided by a range of public bodies, such as Tekes (The Finnish Funding Agency for Technology and Innovation) and VTT (Technical Research Centre of Finland). Finland is also a leader in energy efficiency in the built environment, helped by initiatives such as the ‘Long-term strategy for mobilising investment in the renovation of buildings’, and the ‘ERA17 Action Plan – For an Energy-Smart Built Environment 2017’. Voluntary energy efficiency agreements, such as the Höylä III Programme and the Energy Efficiency Agreement of the Property and Building Sector, are further examples of best-practice. Finland also has a strong support network that provides SMEs with export finance, advice and networking opportunities. However, the outlook for the construction sector is still significantly constrained by the generally weak economic context, and especially the decline in exports due to weak external demand.

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 Finland and other Member States, and gain insight into the European construction sector.

Moderated by : Nadège Rigaudeau

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