Friday, 22 August 2008

Building Permit On Free Fall

"In June 2008, building permits were granted for a total of 5.4 million cubic metres, which is 12 per cent less than one year ago. Cubic volumes went down in all building types, public service buildings excluded."

"In January to June 2008, building permits were granted for a good 15,000 new dwellings, which is 15 per cent less than in the corresponding period one year previously. New building permits were granted for a total of 26.4 million cubic metres, which is 12 per cent less than in the year before. The cubic volume of commercial and office buildings decreased by over one-fifth and that of agricultural buildings by nearly one-third from the January to June period of 2007

First it's important to stress that the government or public sectors are aggressively ramping up investment in construction to try to smooth out the cycle. Indeed the increase year on year of public building permit has soared by a stunning 280%! looks like municipalities are racking up more debt at a time where the cost are elevated.

Second, excluding the public sector, the drop is significant. Building permit reflect the confidence of the construction builders on the residential and commercial market. It's faltering as either the demand or affordability has collapsed. I think it's the combination of both.

Commercial buildings have been popping out everywhere- it's crazy - that's going to put downward pressure on commercial rent, no doubt about it (Same phenomenon currently witnessed in the U.K.).

With regard to residential market, the demand is faltering too. The worrying part is that it has nothing to do with banks. Banks are desperate to provide loan for house purchase. At the end that's how they grow. I guess during a boom there is excess demand and during a bust that demand vanish...this is what is currently happening.


Anonymous said...

I got an offer from Finnish construction company to extend my house only for 20 sq meters and they offer my "very nice price" of 62,000 euros ONLY for basement, walls and roof. That's crazy price!!! Almost 100k USD for 20 sq. m. That's Finnish way to do the business. Many people will be pissed off after they'll try to build houses they've just got permissions for.

HousingFinland said...


I would advise you to wait before making any renovation work if this can be delayed.

For many reasons:
-probability interest rates are going to come down in the next 18 month is very high.

-Construction cost is going to be lower that it is now. Commodity and construction excess are coming toward their long term average.

-Labor and service availability will higher, better and cheaper.