Decline on the construction market is deepening

According to Statistics Estonia, in the 1st quarter of 2009 compared to the same period of the previous year, the total production of Estonian construction enterprises decreased about a third.

In the 1st quarter of 2009 the production value of construction enterprises amounted to 5.0 billion kroons, of which the production value of building construction was 3.2 billion kroons and the production of civil engineering totalled 1.8 billion kroons. Compared to the same period of 2008 the volume of building construction decreased 42% at constant prices. The volume of civil engineering stayed on the same level. The decline was caused mainly by the decreased volumes in dwelling construction on domestic construction market.

Contrary to the domestic construction market which is on decline stage the construction volume in foreign countries increased 6% compared to the same period a year ago. The growth was caused by the building construction.

According to the data of the Register of Construction Works, in the 1st quarter of 2009 the number of dwelling completions was 593, i.e. three times less than in the same period of 2008. More than half (58%) of completed dwellings were situated in blocks of flats. Since the second half of 2007 the demand for new dwellings has been continuously decreasing. In the 1st quarter of 2009 building permits were granted for the construction of 326 dwellings, which is about 3.5 times less compared to the same period of 2008. The most popular type of building was one-family dwelling.

In the 1st quarter of 2009, the number of completed non-residential buildings was 212 with the useful floor area of 260,000 square metres. The useful floor area of office and commercial buildings increased the most. Compared to the same period of 2008, the useful floor area and the cubic capacity of completed non-residential buildings increased.

Trend of construction volume index, 1st quarter 2000 – 1st quarter 2009
(average of quarters of 2005 = 100)





Source: Statistics Estonia

Taxes will go up

The Reform Party agreed yesterday to the demand of the People’s Union, a possible new coalition partner, to balance the budget by increasing taxes, writes Postimees.While until now the Reformists had labelled proposals to increase taxes “a doomsday scenario.” They have no changed their tone and yesterday justice minister Rein Lang said: “I can say with full responsibility that without increasing taxes the Estonian state will not come out of this hole.” 

People’s Union had said before the start of the coalition talks yesterday that they propose to raise individual income tax rate by 4%. Reform Party and IRL have already agreeed to incresase VAT rate by 2% to 20.

This puts into an entirely new light prime minister’s words that he said a few weeks ago to a similar proposal of Social Democrats and finance minister Ivari Padar: “Increasing income tax rate is not a debatable issue in this government.”

Now the Reform Party is doing its best to play down such statements and says that it as known six months ago that ways must be find out of the current crisis.

Margus Tsahkna, general secretary of IRL, the third coalition partner, said that the actual situation with state finances could be even worse than what finance minister Ivari Padar projected. “We prefer budget cuts to increasing taxes, but if the situation is really bad, taxes must go up,” said Tsahkna.

Source: BBN