UK Construction Declines Further

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The construction industry has shown a sharp slow down over the last year, according to figures released by the office for National Statistics (ONS). The results show private and public housing falling much further than was expected.

Private housing orders in the year to February 2008 fell by 9 per cent when compared to the previous 12 months. In the shorter term, the falls were even more pronounced, with orders in the three months to February 2008 down by 13 per cent compared with the previous quarter. A total of £514 million worth of housing was commissioned in this sector during February this year.

Public housing and housing association orders fell by 12 per cent in the year to February 2008; Orders were down 24 per cent in the quarter to February 2008 when compared to the same period of 2007. However the public sector falls are susceptible to larger variations, due to the relatively small size of the sector. A total of £94 million worth of housing commenced construction in this quarter, with the current market price of £166 million.

David Stubbs, senior economist at the Royal Institution of Chartered Surveyors said, “Growth in the construction industry has slowed abruptly in the first quarter of this year. Private residential work loads are now shrinking as home builders react to challenging conditions in the housing market by reducing the number of new homes under construction.”

Keith Miller, chief executive of the Miller Group said, “There are a few areas where prices are going up. And in any case, it is not as if prices are falling disastrously anywhere. The problem is that we aren’t seeing the volume of sales we would like. Customers just don’t want to commit.”

The fundamentals of the housing market are based on supply and demand. No one really anticipated just how severe the credit crunch would be. The days of making a killing, buying off-plan and selling immediately are now gone. After the recent boom years, the housing market was inevitably destined to level out, but rumours of prices going into free fall in the short-term are exaggerated. The current market is still clearly weak, with most people beginning to accept their property is not worth as much this year as last.

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