Featured Sector: Private Housing

Private housing activity has been a key driver behind the recovery in construction output over the last two years. The rise in construction output in 2013 followed a sharp rebound in project starts tracked by Glenigan since late 2011 as house builders opened up sites in anticipation of a sustained revival in market activity. This supported an 8.3% rise in private new housing output in 2013, while the ONS figures show that private housing output in the first eleven months of last year was up 22% on a year earlier.

Over the last year new housing activity has benefited from both improving consumer confidence and support from Government initiatives such as Help to Buy. These factors should support a further strengthening in wider housing market activity and new house sales during 2015.

Private residential work continues to expand at a strong rate. Glenigan data shows that the value of project starts during 2014 was 13.5% up on the previous year. The pace of year on year growth, however, slowed the second half of the year, with project starts during the final quarter of 2014 8.4% up on year earlier.

This is reflected in the CPA’s latest construction trade survey for Q3 2014. This showed that there is still what the CPA describes as “considerable growth” as 35% of respondents reported a rise in workload but the association acknowledges that that “after 18 months of recovery, growth rates are compared to a higher base than a year ago.”

The latest purchasing managers’ index from Markit/CIPS for December 2014 reports that there was a marked slowdown in the pace of residential growth. Whilst housebuilding was still the strongest performing of the three areas covered by the CIPS survey, the index recorded a much slower rise than in September and the weakest since June 2013. Markit cites less favourable conditions, tighter mortgage lending and “renewed uncertainties about the demand outlook” as the prime reasons for the slowdown.

Nevertheless, the private residential sector is set for continue growth during 2015. Overall the economic outlook remains positive, especially for housing market activity outside of the capital. Rising consumer confidence and improved household incomes are expected to lift property transactions and new house sales over the coming year, while the recent Stamp Duty changes have helped ease the moving costs for most purchasers.

The value of underlying planning approvals continued to strengthen during 2013 rising by 17%, while the approval of some major £100 million plus schemes has lifted the value of overall permissions by 36% to £20.4 billion.

Underlying value of construction projects starting on site. (Excludes individual projects of more than £100 million and framework agreements).