Minimal growth for construction

Latest News Thu, Oct 10, 2019 2:20 PM

Construction output increased by 0.2% in August compared to the previous month as a rise of 1.1% in repair and maintenance was only slightly offset by a fall in new work of 0.2%.

According to the latest bulletin from the Office for National Statistics, August also witnessed an increase in output in the three-month on three-month all work series with output rising 0.1%, driven by a rise in new work of 0.5% but offset by a fall in repair and maintenance of 0.8%.

In new work, the increase in the three-month on three-month series was driven by private new housing, private commercial and public new housing, with rises of 1.0%, 0.9% and 3.6% respectively.

In repair and maintenance, the fall in the three-month on three-month series was largely because of the 3.5% decline in private housing repair and maintenance, with a smaller contribution from a 0.2% fall in non-housing repair and maintenance.

Meanwhile, the September 2019 RICS UK Residential Market Survey shows housing sales remaining subdued, and buyer demand and supply slipping into negative territory.

Much of the anecdotal commentary from the survey respondents working in the market blames heightened economic and political uncertainty. The market seems unlikely to gain impetus over the next three months, though sentiment for a year ahead is more resilient.

In September, following three consecutive months of a stable trend, a decline is reported in home listings coming on to the housing market. Comments from contributors are suggesting that the Brexit impasse is dissuading vendors. The new instructions net balance fell to -37% in September, the weakest reading since June 2016.

Average stock levels on estate agents' books, unsurprisingly therefore, remain near record lows. As contributors are reporting that appraisals are down compared to a year earlier, there is little prospect of a pick-up in the immediate future.

Alongside this, a more cautious approach from buyers is visible in the September results. After holding steady in the last four months, the new buyer enquiries net balance fell to -15%. In keeping with this, newly agreed sales fell, with a net balance of -27% (from -11% previously), with activity reportedly slipping in virtually all parts of the UK.

Simon Rubinsohn, RICS Chief Economist, said: "There are good reasons for thinking the latest dip in both buyer enquiries and vendor instructions is a response to the endless wrangling about Brexit, as the October 31st deadline approaches.

"Indeed, much of the commentary from respondents based further away from London and the South East remains relatively sanguine, which is also reflected in some of the metrics capturing expectations.

"However, unless there is a speedy resolution to the ongoing impasse it does seem inevitable that the stand-off between purchasers and sellers will deepen making it harder to complete transactions. This will not only be a direct hit on the housing market itself but could have ramifications for the wider economy as the normal spend on furniture, fittings and appliances that typically accompanies a house move is also put on hold."

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