Nordic construction and civil engineering market

Global financial growth

The global economy continued to strengthen in 2017. The political unrest that characterized the start of 2017 subsided after the French election in May as populist and protectionist currents did not win a stronghold in European politics, as previously feared. There were also positive financial statistics for the Euro zone that showed a clear increase in GNP growth and a continued decrease in unemployment. In Europe growth is expected to continue in 2018 and 2019 as the global economy grows. Growth is strong in the US and is expected to increase further in 2018 since the Republicans’ tax bill made it through Congress. Inflation tendencies continue to be weak in the Euro zone, while they have been apparent in the US. The Federal Reserve is expected to continue increasing interest rates and European Central Bank politics are also geared towards a normalization through lower buybacks of bonds. Despite an overall positive trend there is growing concern regarding the development of both stock markets and inflation.

The economy in Peab’s markets

Sweden

Swedish growth continued in 2017, albeit at a slower rate than in 2016. International growth has made the Swedish export industry an increasingly important engine in the economy and it has also benefited from the weak Swedish krona. Production development in businesses continued to be positive, in both industry and services. Capacity utilization in industry is back on 2008 levels, which has led to greater investment needs. Low interest rates, growing asset values on the stock market and rising employment have been beneficial for household consumption. The current risk is for greater instability in stock markets and Swedish housing prices. All in all, GNP growth in 2018 is expected to remain on the same level as 2017 with a somewhat receding increase in household consumption and net investments. On the other hand it looks as if industry production will gain further momentum.

Norway

Financial growth increased in 2017 mainly due to an increase in private consumption and rising net investments. Unemployment decreased and exports took off, stimulated by growing international demand. Inflation decreased which was beneficial for household consumption and despite falling housing prices households showed greater confidence in the economy. Exports and industrial investments are expected to continue to rise due to global financial growth. The previously hard hit oil sector began to bounce back in 2017 through improved profitability and swelling cash flows and this should mean that investments in the sector will pick up.

Finland

The Finnish economy showed strength in 2017 with GNP growth that is expected to have superseded three percent. The factors behind the financial recovery are the productivity improvements that have been made, including frozen wages, longer annual working hours and less public spending, as well as an increase in global and national demand. More activity in Finnish industry led to considerably higher investments and exports took a leap forward. The private consumption accelerated as well, although just marginally because small raises in wages hold consumption back even if consumer confidence is high. Many indications point to continued positive development in 2018 and the year after, but since household consumption will continue to be limited global development needs to continue to favor Finnish exports for this to happen.

Leveling off from heights in Sweden

After years of dramatically rising housing prices some uncertainty crept into the housing market in 2017. This is partly due to worries about increasing interest levels and partly because the newly implemented higher amortization requirements will thwart the purchasing power of part of the market. The past two years of new production in apartment buildings has also led to a surplus in some market sections and longer sales times. The autumn of 2017 ended with a decline in housing prices and housing construction. As expected, housing construction in general slowed from very high levels and only increased by a few percent. Although housing construction is loosing speed there is still a lot of construction in private and public premises, and particularly in industrial construction which experienced a renaissance after the weak development of the past few years. There are strong indications that collective building construction will have a horizontal development in 2018. Civil engineering construction had a much better development compared to other building construction due to private investments. Growth is expected to continue this year but at a somewhat lower rate.

Horizontal development of building construction in Norway

In Norway the total volume for building construction in 2017 remained roughly on the same level as the previous year. Public investments and new construction of apartment buildings were the only sectors that showed growth while single homes decreased and industrial investments pulled back from the strong growth of last year. All in all, building construction volumes are expected to remain on 2017 levels in 2018 and 2019. On the other hand development in civil engineering construction was positive in 2017 and this trend is expected to continue in 2018.

Tight finances in Finland dampen public investments

In spite of the positive situation in the economy building construction investments in 2017 were somewhat lower than in 2016. Both private and public investments in premises lost speed last year which meant a roll back from the dramatic rise in 2016. This development was, however, expected and resulted in construction volumes returning to 2016 levels. On the other hand housing construction grew in 2017 and new production of apartment buildings was particularly strong. An increase in both housing and premises is expected in 2018. Civil engineering construction showed a weak positive trend in 2017 and the forecast is close to zero growth in 2018. Finland’s tight financial politics are what is holding back public investments.

More sustainable construction

Just as we are becoming increasingly aware of the challenges we face regarding our environment and the effects of climate changes, our society is going through a revolutionary technological transformation that will have an impact on how we live. These are two strong forces that will have an impact on the way we work, shop, transport ourselves and, not least, how we build and use premises and homes. There are a number of consequences worth pointing out. Cities are becoming greener, environmentally friendly transportation is prioritized in city planning, our homes can have their own life cycles and be built as zero or plus energy houses where increasingly larger areas are used for greenery, agriculture or solar energy generation. A circular economy is becoming more and more rooted in the younger generation. The framework for how we build our infrastructure and plan our cities will change due to laws, values or technical development in industries not part of traditional construction and housing industries.

Other major players

Although the Nordic construction market consists mainly of a large number of small companies operating under intense competition and on local markets there are a few very large, national players. Several of them also operate more or less on the entire Nordic market. In building construction the list of companies is topped by Peab, Skanska, NCC and Veidekke. There are also the Norwegian companies AF, BetonmastHaere and Obos as well as the Finnish Kesko and YIT.

When it comes to civil engineering, railroad and road construction the largest players are Peab, Skanska, Veidekke, Norwegian AF, NCC, Svevia and NRC. There is also strong competition in large projects from companies outside the Nordic area such as Implenia, Zublin/Strabag and OHL as well as a number of Italian and Spanish players.

 

Source for text and graphics: Industrifakta

Investments
2013-2018

Housing investments
Initiated construction projects
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Other building construction investments
Initiated construction projects
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Civil engineering investments
Ongoing investments
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