Finland: Construction bankruptcy filings and building permits

I freely admit that I am not so sure how these things are interrelated, but when I posted the article about bankruptcy filings, I had not yet seen this press release on building permits.

Combining the two graphs would indicate that bankruptcy filings started to rise before the great collapse in building permits granted and buildings started. The build-up in building permits granted until the beginning of 2008 seems to be largely because of the volume of newbuilding for non-residential real estate (see the second figure). Non-residential building volumes and residential building volumes began to drop (in the index) sharply from 2007 and 2008 respectively. These developments are probably behind the rapid increase in bankruptcy filings in construction.

There is probably a lag effect, because building projects are usually in an order portfolio, and permits and actual construction do have different time stamps. The decline in new building permits granted may indicate that there is still a significant surplus on the market, or that otherwise fims and private persons for reasons of economic uncertainty don’t (yet?) start contruction projects.

Earlier this year the Commerzbank predicted that for Finland (and Sweden) there is a great risk of big declines in the real estate market, because housing prices have stabilized at a high level, and according to Commerzbank, usually prices get lower. There is also the influence of the general economic situation.

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