8 INDUSTRY NEWS
Construction output to fall for first time in six years, says CPA
Housing sales remain subdued
Sales activity in the UK housing market remained subdued in June, the RICS UK Residential Market Survey reported. Over the month, newly agreed sales have recorded the 16th successive month of continued decline, with 7 per cent more respondents reporting a fall in agreed sales. The Royal Institution of Chartered Surveyors (RICS) said that the continued decline in newly agreed sales “suggests that the softer trend in sales volumes will not improve over the coming months.” The New Buyer Enquiries series, which
gauges the appetite to acquire property, is “showing little reason to expect any uplift,” said RICS. The number of people looking to buy remained flat in June, prolonging the trend which dates back to late 2016. This is likely to persist through the second half of the year, said RICS, with the time taken to complete a sale edging up from around sixteen weeks (Spring 2017) to around eighteen weeks at present. For the second month in a row, new instructions have risen, with 10 per cent more respondents seeing an increase in the flow of properties being put up for sale. However, with average stocks remaining close to historic lows at 43, the RICS believed it is “too early to suggest that this issue is lessening as an obstacle.”
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The survey has in the past highlighted a lack of available second-hand stock as a key impediment to the efficient functioning of the market, and the pipeline looks unlikely to improve with new appraisals of property by valuers down on the same period last year. The RICS added: “Looking ahead, sales expectations are mildly positive for the coming three months, but at the 12 month point chartered surveyors are more cautious, with the net balance slipping to zero for the first time since last October.”
The lack of activity on the sales side also continues to impact prices. At the headline level they remained flat in June, and it is the thirteenth consecutive month that chartered surveyors have reported a sluggish picture, with respondents “not anticipating much change in the coming three months either.” RICS added: “Looking at the lettings
data, new instructions coming through to agents has dropped again (a net balance reading of -22 per cent). This is the 21st consecutive month in which the feedback has pointed to a lower supply of rental properties coming to market.” The RICS survey is a seen as a “good lead
indicator” including around two quarters of HMRC and Land Registry transactions.
The UK construction industry is expected to experience a moderate fall in 2018, following five years of consecutive growth, according to the Construction Products Association (CPA). The CPA’s Summer Forecasts anticipate growth for the whole of 2018 to fall 0.6 per cent before accelerating to 2.3 per cent in 2019 and 1.9 per cent in 2020, with house- builders the primary drivers of growth for the whole industry. In private housing, first-time buyer demand, enabled by the Government’s Help to Buy scheme, continues to boost sentiment and encourage an increase in housebuilding activity outside London. The sector’s output is forecast to rise 5 per cent in 2018 and 2 per cent in 2019. The infrastructure sector also remains a primary driver of growth for the whole construction industry, with output forecast to hit a historic high of £23.6bn by 2020, driven by large projects such as HS2 and Hinkley Point C.
However, the CPA believed the sector “will be hoping Government will push to ensure delivery on the ground with work on both projects already significantly delayed”. It added: “Without the forecast growth in infrastructure and private housing activity, total construction output would fall by 3 per cent in 2018 and remain flat in 2019.”
The demise of Carillion resulted in a poor performance for the industry at the start of the year, which combined with the bad weather, lost UK construction £1bn of work. It is estimated 60 per cent of this work may be recovered, but, said the CPA, Carillion’s collapse will cause further delays at the £335m Royal Liverpool University and Birmingham’s £350m Midland Metropolitan Hospitals – both on hold until at least 2019.
Brexit uncertainty “continues to drive the sharpest decline for construction in the commercial sector, particularly felt in the offices sub-sector,” which is expected to fall 20 per cent in 2018 and a further 10 per cent in 2019. Meanwhile, the shift to online shopping is causing woes for the high street, with new retail construction expected to fall by 10 per cent this year.
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