That was a good article! You could read between the lines that the rise in material prices has indeed been squeezing those builders. Interest rate hikes are now being blamed for this necessary evil.
I would argue that even if interest rates hadn’t been raised, construction firms would still be going under due to unexpected inflationary turns. Interest expenses certainly add their own headache to this mess.
Finally, some positive news for the construction industry. A major investment in Kivistö, Vantaa, by Kesko and SSA.
The development of the Kivistö area (shops) has indeed been a sad sight to watch from the sidelines; the residents have probably been really pleased. Originally, there was supposed to be a large shopping center with a Prisma and a Citymarket, but nothing ever came of that plan. In the end, fortunately, at least a smaller mall with an S-Market and a Lidl was managed to be built. And apparently, a Citymarket sometime in the future.
Well, the Kivistö situation doesn’t directly belong in this thread, but the new shopping center is set to be completed on October 5th, and this linked shopping center next to it in spring/summer 2026. Together, they are likely already close to that original large-scale shopping center project that was planned back in the day. Add to that the planned multi-purpose arena with a capacity of over 30,000, and Kivistö finally has great prospects ahead.
Here is an article from Salkunrakentaja about the construction industry and its ongoing crisis; the piece quotes thoughts from the Confederation of Finnish Construction Industries (RT), among others.
“If construction remains in a deep slump for too long, the effects will be severe for the entire economy, employment, and the housing market,” warns Aleksi Randell, CEO of the Confederation of Finnish Construction Industries RT.
The article’s subheadings:
Where are the construction industry’s own measures for weathering the slumps? Less than a year with interest rates slightly above the long-term average, and every single construction company is on the brink of bankruptcy, again.
Lindtman proposes an emergency package for the housing market:
I guess pretty much everyone who bought their first home in a new development in the Helsinki metropolitan area over the last 4 years will soon be penniless, as the monthly costs for a studio or a small one-bedroom apartment jump to about €2,500. At least there won’t be anything left for consumption.
Could you tell me how the costs can become so high?
Älvärit are leaving Finland for the time being:
RS financing could be transferred from banks to a new state housing construction financing institution, which could manage and limit risks across all owners and properties under the same terms. A suitable name could be, for instance, AsuntoRalli. The “Rally Nation” could then standardize the terms for RS/housing company loans and fix the interest rates, so that a similar situation would no longer occur.
If a loan from a bank or through a housing company is close to 300,000 euros, then interest, repayments, and maintenance fees start to be in that ballpark in total at the current interest rate level.
Well, not all studios or even one-bedroom apartments in the Helsinki metropolitan area have “quite” cost that €300,000. Where have those even been/are they for sale?!
It’s worth checking YIT’s website, for instance, to get an idea of the price levels in Helsinki. Apartments have been sold at these and similar square meter prices in recent years.
I am unfortunately convinced that next winter, as the final interest rate hikes are applied to mortgages and housing company loans, there will be more than just a few forced sales. I wish I were wrong.
The government should urgently and temporarily restore the mortgage interest tax deduction for owner-occupied homes to avoid forced sales and prevent a significant decline in purchasing power.
Ah, so you were talking about apartments in Helsinki city center/the surrounding area. That’s a bit different from what you wrote about those who bought studios/one-bedroom apartments in the entire capital region. You can quickly check the situation on Etuovi.
I don’t always understand what people are trying to achieve with these exaggerations…
What construction recession?
There isn’t one, at least not if you look at the development of construction costs, +2.1% per year.
Labor costs have risen a staggering 5.7%, while materials have decreased by only -0.4%.
Material prices are correcting and are indeed correcting downwards as demand is clearly tanking, and on the other hand, input costs in the supply chain have fallen/are falling. Statistics look at history.
Wages are notoriously downwardly inflexible, except by reducing their quantity and through choices in new recruitment.
Land pricing, as I understand it, does not particularly flex downwards in growth centers because people are flocking to them, and in this sense, there is demand pressure. Easy to hold. Of course, the most senseless deals will remain unmade.
The price of money has become ‘high’, i.e., a base rate of over 4% and a 0.5-1.0% margin on top. During a 20-year loan period, there is plenty of time for it to decrease, for example, starting in 8-12 months.
Those are probably the most important elements of pricing calculations alongside interest rates.
In my opinion, the construction sector crisis could be alleviated, in addition to waiting, by for example:
-abolishing transfer taxes. It hinders the ability to optimize housing location and finding the right-sized home. For first-time buyers, it is already 0%.
-mortgage interest deduction for first-time buyers, up to a certain cap, for a certain number of years
-bringing forward genuinely necessary public construction
-lowering VAT on new construction from 24% to something lower; after all, taxes account for over 40% of the price of a new home
A general interest deduction would certainly help current mortgage holders, but it boosts asset valuations unnecessarily, i.e., the buyer’s benefit is lost to price increases.
https://twitter.com/PasiSSorjonen/status/1702555033923985626?t=BMjo3vc1DHalcUVr0DGdwg&s=19
The construction slump will certainly hit construction companies in different ways, depending on how much of their turnover comes from residential construction.
Personally, I wouldn’t fully agree that wages wouldn’t also be flexible downwards. Firstly, many construction workers are paid higher wages than the collective bargaining agreement (TES), so as the demand for labor decreases, one would think at least some workers would be ready to work for a lower wage than before.
In addition, subcontractors are forced to lower their contract and/or hourly rates due to increasing competition. Whether they can pass these reduced prices on to their own wage costs depends on the situation.
One would also think that material costs would decrease as demand falls. Already, for example, timber prices have come down significantly from the COVID era. At the very least, overpricing will decrease.
In my opinion, the interest rate deduction should be temporarily restored for everyone, not just for first-time homebuyers. A fixed-term (e.g., 2 years) law would certainly not boost house prices yet. Besides that, it would leave people with more disposable income, which would increase other consumption. Furthermore, this would surely have a positive psychological impact on people. Of course, one should consider not increasing inflation with this, which, according to the latest data, is already easing significantly in Finland.
I wonder if the increase in fuel prices and concrete production have also been taken into account there?
These should also be considered in the calculation if you want to order a cubic meter of concrete to a site compared to, for instance, two years ago.
Personally, I would postpone ordering concrete with borrowed money unless the bank gave an interest-free loan and the concrete truck driver lowered their hourly rate, so I wouldn’t have to pay for the expensive diesel myself.
Let’s turn the discussion from these silly housing prices back to the topic at hand 
