Veidekke ASA: Reduced pressure in the construction market
Veidekke expects a moderate decline in production in the Scandinavian building construction sector in 2019 and 2020, but a modest increase in civil engineering production. These developments are forecast to reduce pressure in the market and improve access to construction capacity and skilled labour throughout the supply chain.
“Production in the sector increased by more than 40 per cent over the past four years, and, in our opinion, the market can now accommodate a moderate decline”, says Kristoffer Eide Hoen Director of Analysis in Veidekke. Total production in building construction and civil engineering sector is expected to fall by 3 per cent in 2019 before stabilising in 2020.
The Scandinavian residential market is now less heated than a few years ago:
“Over the past few years, the Norwegian, Swedish and Danish authorities have all introduced credit restrictions to stem rising house prices and debt levels. Although the timing and social profile of some of the measures are debatable, the effects on the second-hand housing market have thus far been a more stable price development, relatively high transaction levels and increased supply,” says Eide Hoen.
Sales of new residential units increased somewhat last autumn but remain significantly lower than in the peak years of 2016 and 2017.
“Competition to attract buyers for new units has hardened considerably. This is as a result of stricter credit conditions and of new projects still exceeding demand to some degree,” says Eide Hoen. “However, the news is not all bad for property developers. In capital city regions developers have struggled as much with reduced margins on purchases as with lower willingness to pay among buyers. We anticipate that reduced capacity pressure in the building construction sector will alleviate this problem.”
The number of new building starts granted in the autumn of 2018 indicates continued high activity levels in several metropolitan regions well into 2020, albeit with some regional variations. While the Stockholm region experience a decline throughout 2018, production has only just started to fall in eastern Norway and Oslo. Gothenburg and cities in western Norway are not yet showing signs of a downturn.
Continued growth is anticipated in the civil engineering sector, particularly in Sweden. In Norway, several major transport infrastructure projects have been delayed or postponed. This has put progress behind schedule compared to the targets in the national transport plan, for the first time since the early 2000s. Given indications of less generous public budgets in the years ahead, this situation appears likely to continue.
Veidekke’s full analyses relating to the Scandinavian construction and civil engineering market are available on veidekke.com.
For further information, please contact:
Kristoffer Eide Hoen, Director of Analysis, Veidekke ASA, +47 976 75 434, Kristoffer.Eide.Hoen@veidekke.no
Veidekke is one of Scandinavia's largest construction and property development companies. The company undertakes all types of building construction and civil engineering contracts, develops residential projects, maintains roads, and produces asphalt and aggregates. The company is known for its involvement and local knowledge. Its annual turnover is approximately NOK 36 billion, and half of its 8,600 employees own shares in the company. Veidekke is listed on the Oslo Stock Exchange and has always posted a profit since it was founded in 1936.