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

March saw the largest monthly fall in construction output for almost four years as the sector declined sharply in the first quarter of 2016 but in the midst of the gloom, housebuilding is at its highest since records began, according to the latest figures released today.

Despite an estimated dip of 0.9 per cent, the Office for National Statistics said output fell 1.1 percent from January to March compared with the last three months of 2015.

Construction output for the third month of the year also plunged 3.6 per cent compared with February – the worst month-on-month figure since December 2012.

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

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

The level of private new housing has been increasing gradually 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 total new housing is also at its highest at £7.5 billion.

From January to March, there was an increase of 4.8 per cent in total new housing output compared with the three months previous.

Both public and private new housing reported increases of 4.2 per cent and 4.9 per cent respectively.

When compared with the same period a year ago, there was an increase of 3.4 per cent in total housing, with private housing increasing by 7.5 per cent offset slightly by a fall in public new housing of 14.3 per cent.

Holland said: “Public and private sector housing are the only sectors to have witnessed an increase in construction output quarter-on-quarter. A minor monthly setback in March can be forgiven, because the direction of travel over the past few years is certainly heading in the right direction – and it’s private housebuilding and development that is firmly at the wheel of this growth.

“London needs to build more new homes than anywhere else in the country. But they also need to be delivered at the right price. It’s not just enough for our new Mayor to pledge an annual quota for housebuilding – while that’s challenging in itself, it needs to be coupled with affordability to truly work for everyday Londoners. Housebuilding efforts in the capital need to cater for the £250,000 to £850,000 price range, as this is where we see the strongest and most urgent buyer demand from first-timers and growing families.”

Commenting on the new construction output figures, Michael Thirkettle, chief executive of leading interdisciplinary international construction and property consultancy McBains Cooper, said: “There is unlikely to be any respite in the weak construction figures in coming months.

“The uncertainty over Brexit, together with the softer growth forecasts from the Bank of England, mean decisions on strategic investment and major commercial projects will be delayed until at least after the referendum.

“In London especially, there are worries that prices may have peaked in some quarters, and housebuilders are telling us that they are waiting to see the detail of the new Mayor’s housing policies before committing resources to new developments.”

However, Richard Threllfall, partner and head of infrastructure building and construction at KPMG, largely 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 experiencing on the ground, with strong demand across all segments and growing order books.

“Yes, the housing sector had a weaker than expected start, but is warming up nicely in the Spring sunshine, and the civils market remains very strong thanks to pipelines of activity in road and rail. Sweepstake, anyone, on how long before we see an upward revision of the numbers?”

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