Scandinavian construction markets set for downturn in 2023

The Scandinavian construction markets are likely to see a reversal of last year’s growth as a result of higher interest rates and inflation.

Scandinavian construction group Veidekke forecasts that the apartments segment is likely to be hit the hardest, due to the decline in construction compared to previous years, with the most severe impact being felt in Sweden.

At the end of Q1 2023, there are signs that secondhand residential prices are stabilising, while the labour market appears stable and domestic migration to urban centres is increasing.

The head of analysis at Veidekke, Kristoffer Eide Hoen, commented: ‘Our forecasts indicate a 6% decline in the Scandinavian construction markets this year, i.e. a reversal of last year’s growth. The greatest drop is expected in Sweden, which also recorded the highest growth figures last year. It is therefore reasonable to expect somewhat greater stability in the market for new residential units following last autumn’s severe drop. However, the market is vulnerable to unforeseen developments and interest rate rises above current expectations.’

On a positive note, growth in demand for commercial buildings exceeded expectations throughout 2022, with particularly positive trends being observed in the industrial and logistics segments.

Kristoffer Eide Hoen adds: ‘Rising interest rates and a generally weaker economic outlook indicate that the most likely scenario is a decline from last year’s record levels. However, two potential wild cards are depreciation of the Norwegian and Swedish currencies – which strengthens the competitiveness of many businesses – and high capacity utilisation in many industries. Like last year, business investment levels may well surprise us positively.’

Due to mergers and the absence of increased central government allocations, the municipal sector is not expected to grow significantly in the next few years, despite its responsibility for key building segments like schools and care homes.

The civil engineering market – in which central government and energy companies account for the majority of projects and financing – remains strong throughout Scandinavia.

Activity levels should remain high in the transport infrastructure sector, and the energy, water supply and sewerage segments will account for an increasing proportion of civil engineering projects.


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