Construction market overview: April 2019
Construction growth continues to slow, with only residential reporting improvement
The ONS report that in February construction output decreased 0.6% in the three-month on three-month all work series, driven by a 1.0% fall in repair and maintenance and 0.4% fall in all new work. These declines are due largely to the weakness seen in December 2018, as February marks the 3rd consecutive decline in the three-month on three-month series, showing a general trend of a slowing growth since mid-2018.
The March 2019 IHS Markit/CIPS UK Construction shows a marginal decrease in overall construction output as the index registered 49.7. This reading, up from 49.5 in February shows a sustained decline in total construction activity, representing the first back to back fall in output levels since August 2016. Commercial construction was the worst performing area of activity with business activity dropping by the greatest extent since March 2018.
Residential building was the only area to improve, with a modest increase in housing activity. Yet this increase represents the strongest upturn seen so far in 2019. The survey also noted widespread reports that Brexit uncertainty and concerns about the wider economic outlook had led to delays in decision making amongst clients.
Barbour ABI also report positive figures for residential construction. Their Economic and Construction Market review for February shows contracts awarded in the residential sector reached £1.7bn, an increase of 13.1% compared to January 2019. Barbour ABI also report an overall decrease in the total value of construction contracts awarded in February, when compared to January, the value is £5.4 billion, a 0.5% decrease. Yet this figure is 10.6% higher when compared to February 2018.
The CPA’s latest state of trade survey shows favourable results for the construction products manufacturing sector in Q1 2019, as sales of products and materials continue to grow. And despite ever present Brexit uncertainty, manufacturers’ sales expectations for the next 12 months remain optimistic.
The RIBA Architects’ Future Trends Workload for February 2019 shows great improvement, from January’s low of -3 as the index rises to +4 in February. This increase is despite the survey showing that in the last 3 months workloads for architects were 6% lower than the same period last year, suggesting that the market for architectural services is now shrinking quite significantly.
The construction material price index for all work increased 4.3% in the year to February 2019, and rose 1.3% on a monthly basis. Construction material prices for new housing, other new work, as well as repair and maintenance rose by 2.9%, 4.7% and 4.0%, respectively in the year to February.
Overall new home registrations decrease, despite regional growth
NHBC’s latest new home registration statistics show that 10,721 new homes were registered to be built in the UK during February 2019, a decrease of 7% compared to February 2018. 7,550 were registered in the private sector (9,080 in 2018), with 3,171 in the affordable sector (2,495 in 2018). Commenting on these figures NHBC say “despite the slight decrease overall in registrations half of the 12 UK regions experienced some growth in this period, including London, the North West and the South East”.
According to the Bank of England, in February the number of mortgages approved for house purchase increased 0.2% on an annual basis, but fell 3.5% when compared to January. The value of these loans was 1.2% higher than a year ago and is a decrease of 4.0% month-on-month. UK Finance also report an increase, with the number of mortgage approvals for house purchases having increased 1.5% year-on-year in February, with total gross mortgage lending reaching £19.1bn.
Annual average house prices saw slow growth in the year to January 2019, remaining subdued right through to the latest figures from March 2019. Nationwide report that annual house price growth remained subdued in March showing growth of just +0.7%. And Halifax report that annual house price growth remained steady at +2.6%. According to the ONS annual house prices rose 1.7% in January, but saw a slower rate of growth than reported by the ONS in December 2018, making it the lowest annual growth for the UK since June 2013.
On a monthly basis Halifax report that house prices decreased 1.6% in March. A contrast to February that saw home sales 2.8% above the previous 12-month average. And according to the ONS house prices decreased by 0.8% on a monthly basis in January 2019, but Nationwide report monthly prices to have Increased 0.2% in March. Suggesting that we are still seeing growth in house prices, but at a very slow rate.