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Construction output continues downward trend but housebuilding holds up

by: Chris Menon
  • 10/10/2017
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Construction output continues downward trend but housebuilding holds up
Construction output contracted by 0.8 per cent in the three month on three month series in August 2017, according to the latest figures from the Office of National Statistics.

This decrease in output was apparently driven by decreases in both repair and maintenance, which fell 0.6 per cent and all new work, which fell 0.9 per cent.

More positively, construction output grew 0.6 per cent month-on-month in August 2017, mainly because of a 1.7 per cent increase in all new work, comprising a growth in private housing of 2.3 per cent and infrastructure, which increased by 3.6%.

Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics commented: “August’s month-to-month increase in construction output should not distract from its underlying downward trend.”

Tombs explained: “The 7.8% quarter-on-quarter fall in the official measure of construction orders in the second quarter shows that the near-term outlook is bleak.” Although he did acknowledge that, “housebuilding has held up well in recent months and that construction in the private industrial sector has begun to recover.”

The broker market view

Craig Hall, new build manager at Legal & General, which runs the largest mortgage club for brokers in the UK, said of demand for mortgages for new build residential properties: “The mortgage market is very much open for business. There are currently 20 lenders supporting Help to Buy equity loan scheme and I’m in discussion with a further four to five lenders intending to join the scheme.”

“There is plenty of desire and appetite from lenders to support the new build market, particularly as lack of existing stock plus challenges with raising a deposit means more first time buyers are looking at new build and utilising the Help to Buy scheme,” he added.

James Chidgey, new homes relationship manager at the Mortgage Advice Bureau confirmed: “Demand for new build residential mortgages is certainly holding up because of the Help to Buy scheme. Another £10bn should take us through to 2021 and we’re waiting to hear in the November Budget what happens after that.” He added that It’s a very important scheme that encourages builders to build and helps maintain affordability for buyers.”

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