Housebuilding at Highest-Ever Level Despite First Quarter Dip in Construction Output, Says Ons

According to new numbers released today, housebuilding is at its greatest level since records began, despite the fact that March experienced the largest monthly dip since nearly four years in construction output due to the sector’s severe decline in first-quarter 2016.

A decrease in output of 1.1% was recorded between January and March of this year, according to the Office for National Statistics, against a projected decline of 0.9%.

Construction output for the third month of the year also plummeted 3.6 per cent compared with February – the poorest month-on-month number since December 2012.

Downward pressure on the quarter came from all new work which declined by 0.6 per cent and repair and maintenance which decreased by 1.9 per cent.

However, “behind the gloomy headlines, housebuilding is the one bright spot in the current construction scene,” says Charles Holland, head of residential development and investment at Marsh & Parsons.

The level of private new housing has been increasing progressively since early 2013 and in the first first quarter of 2016 it was at its highest since records began in 1997 at £6.3 billion, while the level of overall new housing is also at its greatest at £7.5 billion.

From January to March, there was an increase of 4.8 per cent in overall new home output compared with the three months preceding.

Increases of 4.2% and 4.9% were recorded in new public and private housing, respectively.

Compared to the same time period a year ago, overall housing increased by 3.4%; private housing increased by 7.5%, offsetting slightly a decrease in new public housing of 14.3%.

Holland said: “Public and private sector housing are the only sectors that have observed an increase in building output quarter-on-quarter. Even though March saw a slight decline, the overall trend over the previous few years has been positive, with private housebuilding and development playing a key role in this expansion.

As a result, London has the greatest requirement for new housing construction in the country. But they also need to be delivered at the proper price. It’s not just enough for our new Mayor to set an annual quota for housebuilding – while that’s difficult in itself, it needs to be linked with affordability to actually work for average Londoners. Housebuilding initiatives in the capital need to provide for the £250,000 to £850,000 price range, as this is where we see the largest and most urgent buyer demand from first-timers and increasing families.”

Michael Thirkettle, chief executive of prominent worldwide construction and property consultant McBains Cooper, commented on the new output data for construction: “There is unlikely to be any relief in the disappointing construction figures in the coming months.

“The uncertainty about Brexit, along with the weaker growth estimates from the Bank of England, imply decisions on strategic investment and significant commercial initiatives will be deferred until at least after the referendum.

Builders tell us they’re holding off on new projects until they know the details of the next Mayor’s housing policies, especially in London, where some fear prices have peaked.

However, Richard Threllfall, partner and head of infrastructure building and construction at KPMG, substantially disagrees with the figures.

He said: “Apologies ONS, but I just don’t believe today’s output figures. They don’t ring true with what the industry is witnessing on the ground, with solid demand across all segments and expanding order books.

“Yes, the housing sector had a poorer than expected start, but is warming up well in the Spring weather, and the civils market is quite strong thanks to pipelines of activity in road and rail. Is there a contest to see how long it will be until the figures are revised higher?

Last Updated on December 29, 2021

Indra-Gupta

Author: Indra Gupta

Indra is an in-house writer with a love of Newcastle United and all things sustainable.

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