The European residential construction sector is expected to experience a decline in completed dwellings by 2025, according to calculations by the EUROCONSTRUCT forecasting network, which includes the ifo Institute. Factors such as rising interest rates, increased construction costs, and uncertainty surrounding real estate prices are leading to caution among builders and potential buyers.
Countries like Sweden, Denmark, Germany, and Hungary are projected to see a significant decrease in completed dwellings, while countries like Ireland, Portugal, Spain, and Slovakia show positive growth prospects.
In Germany, the shortage of orders in residential construction continues to worsen, with a record high proportion of companies reporting insufficient orders. Additionally, cancellations of existing orders have reached new heights. These challenges are indicative of the overall cooling down of the residential construction sector in Europe.
In Finland, particularly in the Helsinki metropolitan area, the housing market is facing difficulties. According to Helsingin Sanomat, the sale of new apartments has significantly decreased over the past six months, leading to a growing inventory of unsold units. This phenomenon is reflected in the emergence of "ghost buildings" – newly constructed buildings with a large number of unoccupied units. For instance, a recent apartment building constructed by YIT in Töölöntullinkatu remained nearly empty in early June.
The situation is not limited to a few isolated cases but appears to be a broader trend. Several upcoming construction projects in Helsinki, including one in Länsi-Pakila, show a substantial percentage of unsold units. These developments raise concerns about the market's ability to absorb new housing supply.
Despite the challenging market conditions, residents of these "ghost buildings" in Helsinki, such as those in Arabianranta, maintain a calm outlook. While initially worried about the slow sales progress, these residents have adapted to the situation and continue to live in the buildings without significant disruptions. They express confidence in the stability of the construction companies involved and believe that the situation will not adversely affect their ongoing expenses.
The housing market in Finland, including the Helsinki metropolitan area, will need to navigate through these difficult times. The stabilization of interest rates and potential adjustments in regulations may play a crucial role in revitalizing the market. Additionally, continued government support for first-time homebuyers, as seen in initiatives like the ASP loan system, can provide opportunities for individuals seeking to enter the housing market.
As the housing market evolves, it will be essential to closely monitor the impact of these factors and their implications for residential construction and the overall economy. Adapting to changing conditions and finding innovative ways to stimulate demand will be crucial for a sustainable and resilient housing market in Finland and across Europe.
Source:
1. Munich, July 19, 2023 – European Residential Construction Cools Down (ifo Institute)
2. Helsingin Sanomat: "Helsingin seudulle nousee nyt ”aavetaloja” ilmiöksi asti – ”Olemme pysytelleet rauhallisina”, sanoo asukas" (Translated: "Helsinki Sees 'Ghost Buildings' as a Phenomenon – 'We Have Remained Calm,' Says a Resident")
HT
