ONS says construction output remains flat in December – Mortgage Finance Gazette
The flat volume came from a 0.5% increase in new work, offset by a 0.7% decrease in repair and maintenance on the month.
At the sector level, the main positive contributors were seen in non-housing repair and maintenance, and infrastructure new work, which increased by 5.4% and 3.7%, respectively.
The main negative contributors were seen in private housing repair and maintenance, and private new housing, falling 8.5% and 2.3%, respectively.
Quarterly construction output increased by 0.3% in the last quarter of last year compared with Q3.
The increase came from a 0.4% rise in both new work and a 0.1% gain in repair and maintenance.
Annual construction output increased by 5.6% last year compared with 2021, which follows a record increase in 2021 of 12.8%.
Total construction new orders decreased by 1.8% (£242m) in Q4 2022 compared with Q3 2022.
The quarterly fall came mainly from private commercial new orders and infrastructure, which fell 9.6% (£380m) and 11.8% (£305m), respectively.
The annual rate of construction output price growth was 9.7% in the 12 months to December 2022.
This has slowed slightly from the record annual price growth in May 2022, which stood at 10.5%.
Commenting on the figures, Propp managing director Paul Elliott says: “It’s a mixed bag right now. We’ve seen some landlords gearing up by releasing equity in preparation for a market downturn whilst others have been talking about exiting the market.”
“As for developers, the word on the street is that some of the bigger developers aren’t looking to break ground on new sites until the market starts to recover, but as demand for housing continues unabated, this creates an opportunity for small- and medium enterprise (SME) firms to carve out some market share.”
“In terms of securing finance, it’s all driven by how the relevant lender is funded, with balance sheet lenders being a bit more pragmatic than others.”
“I’ve heard stories of surveyors being advised to shave 10% off GDVs for projects with a build schedule of more than six months. With any asset class, if values decrease there are winners and losers and property is no different.”
Mather and Murray Financial independent financial advisor Samuel Mather-Holgate comments: “The amount of development enquiries we are receiving has fallen substantially from the summer. Builders and those looking to refinish just aren’t entering the market now.”
“Higher finance costs and falling assets have scared them off and they would rather sit on their hands until the summer when they can snap up a bargain. By then, rates should start dropping, which should also increase confidence.”
Meanwhile, Beard Construction finance director Fraser Johns adds: “As predicted and many firms prepared for, construction output continued to flatten into December as ongoing impacts from high interest rates and diminished confidence impacted new housing.”
“But once again, the data shows a tale of two halves. The slowdown in housing work in both private new housing and private housing repair and maintenance was offset by an increase in new work across key sectors.”
Johns continues: “Any appetite for new commercial work will certainly make for encouraging news, especially as energy costs continue to stabilise and material costs for once stay within expectations. While the cost to borrow still remains higher than many have become accustomed to, we’re starting to see positive indicators that inflationary pressures are beginning to ease.”
“Those firms that can demonstrate their skillset in delivering smaller, specialised projects in key sectors such as education, healthcare and both local and central government will be well placed in the coming 12 months. Constructions firms need to stay close to all stakeholders, continue to adapt, and remain lean and flexible in the months ahead.”