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FLUCTUATIONS IN CONSTRUCTION OUTPUT |
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As a part of a market economy the construction industry follows the ups and downs of the surrounding national and international economy. Since building is still very labour intensive and has a high multiplier effect the industry also plays an important role in the Danish economy and it is very often used as a tool to regulate the level of activity. In figure 4, the fluctuations in the number of built housing units is illustrated. During the period 1960 to 1973 the output shows a continued growth doubling the output. In 1973 the first oil crisis triggered off a continuous reduction of construction output for the rest of the 1970s and into the early 1980s. In the mid 1980s the output increased slightly, among others due to a change of certain tax-rules. From late 1980s up till 1993 the activity level in new construction has generally been low, according to official studies not least reflecting the mature state of the building market.
Thus the overall impression is the massive change in output from approximately 58.000 units per annum in 1973 to approximately 14.000 units in 1993. Compared to any other industry such fluctuations require an unprecedented flexibility of firms to adapt to new segments of the market as well as an ability to reduce cost. Indeed, the dramatic fall in output of new buildings does not reflect the true activity level in the building industry. Renovation and refurbishment activities have gradually gained importance in terms of employment and turnover for the companies in the building industry. The employment figures for new building and renovation activities in the latest 20 years are illustrated in figure 5. The significance of the renovation market has obviously led to an increase in knowledge and competence among all the parties in the construction process.
Figure 5 - Employment by Subsector The market regulation methods of the Danish government take various forms. For instance, as mentioned above, the state has offered favourab-le conditions for reduction of interest rates for building finance in order to stimulate activities. Or it gives direct subsidies to tenants when renovating or improving their dwellings/houses. On the public spending side it is common to initiate large infrastructure projects in times of over-capacity in the construction industry. To prevent overheating in the economy the government typically tries to reduce the level of activity in construction by making it financially less favourable to build and own houses and by postponing larger investments in civil works. Another more practical method of levelling activities is to move public projects to winter periods, when building activity is normally lower due to weather conditions. The Boligministeriet has been very active in promoting incentives for higher activity through the cold period of the year by developing methods and techniques for construction during wintertime.
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