Thursday, 17 November 2016

UK Construction Market Update - October

The Construction Products Association’s latest construction forecasts gives a mixed picture for construction over the next two years, due to the impacts of the uncertainty following the EU referendum. Construction activity is expected to remain flat in 2017 and 2018; however this hides variation at the sector level, with growth in infrastructure and education offsetting falls in activity in areas such as commercial offices and industrial.

Current figures also provide a mixed picture.

The Markit/CIPS UK Construction PMI October report shows business activity increasing at its fastest pace since March 2016. The Index registered 52.6 in October 2016 an increase from 52.3 in September 2016, and above the neutral value of 50.0 for the second month running. Yet latest figures from the Barbour ABI Economic and Construction Market Review, show that in September 2016 all contract activity decreased by 2.4% compared to August 2016 and is 17.1% lower that the value recorded for September 2015.

UK Construction PMI - October: 52.6
The ONS have released their report Construction output in Great Britain: September 2016 and July to September 2016. Output increased by 0.3% in September 2016 compared to August 2016. Yet output was estimated to have decreased by 1.1% in Q3 2016 compared to Q2 2016, due to a decrease in all repair and maintenance, which was only partially offset by an increase in all new work.

The Construction Product Association’s latest State of Trade Survey shows continued growth for a fourteenth consecutive quarter in Q3 2016, with firms across all areas of construction reporting an increase in activity. However indicators of future growth weakened as activity may be slowed by inflationary pressures, caused by rising wages and imported material costs due to Brexit.

The House of Commons Library briefing paper summarises early indications of the impact of Brexit on the UK housing market and house building industry. Research undertaken by The Homebuilding and Renovating Show shows that, 83% of self-builders are continuing projects despite fears over Brexit and only 1.8% have decided to cancel projects, with 64% saying they are confident that the housing market will remain stable post Brexit.

The latest residential market survey from RICS shows that homebuyer demand has increased for the second consecutive month in October 2016; however the supply of available homes remains restricted, fuelling a rise in prices. The NHBC reports that almost 36,000 new homes were registered in the UK in Q3 2016, with the overall number of new home registrations virtually identical to the same period last year, when 35,954 new homes were registered. The Council of Mortgage Lenders estimates that gross mortgage lending decreased by 7% in September 2016 reaching £20.5bn compared to the £22.1bn reached in August 2016.

There have been some conflicting reports of how house prices have changed. The ONS House Price Index reports that house prices increased by 8.4% for the year to August 2016, up 0.4% on the year to July 2016. Whereas The Halifax House Price Index reports in the last 3 months (August – October) house prices were 0.1% lower than the preceding quarter. And in further contrast to this the Nationwide House Price Index reports that in October 2016 house prices were unchanged month on month, with annual house price growth slowing to 4.6%.

Source: Competitive Advantage Consultancy Ltd