Construction Market Overview: August 2024
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Mixed signals for construction in Q2 2024 amid signs of growth ahead
The ONS have published their construction output data for June 2024, showing that for Q2 2024 construction output saw a slight decline of 0.1% compared to Q1 2024, primarily due to a 0.5% decrease in new work and despite a 0.4% increase in repair and maintenance. However, on a monthly basis June saw construction output grow by 0.5%, driven by increases in both new work (0.9%) and repair and maintenance (0.1%). This follows a revised monthly growth of 1.7% for May and a revised monthly decrease of 1.0% in April.
In July, UK construction experienced its fastest growth in since May 2022 extending the current sequence of growth to five months, as the S&P UK Construction PMI rose to 55.3, up from 52.2 in June. This increase was driven by strong growth in new orders and activity across all construction categories, especially in civil engineering, which saw the sharpest rise in nearly two and a half years. Firms responded to higher demand by increasing both purchasing activity and staffing levels for the third consecutive month. However, this surge in demand also led to emerging pressures on supply chains and a faster pace of input cost inflation. Despite these challenges, construction firms remain optimistic about continued growth in the coming year, supported by improving client confidence and new product developments.
The Construction Products Association’s latest State of Trade Survey for Q2 2024 indicates early signs of recovery in the construction product manufacturing sector. Both heavy side and light side firms reported increases in product sales, with 30% of heavy side manufacturers and 13% of light side manufacturers seeing growth. However, sales volumes remain lower compared to a year ago, reflecting ongoing challenges such as weak demand due to stagnant GDP growth and high interest rates. Despite a positive outlook for the next 12 months, concerns persist over demand strength and labour availability, with manufacturers highlighting the need for strategies to attract and retain workers as a key long-term issue.
The DBT construction material price index for all work decreased 0.3% month-on-month in June 2024 and was 0.9% lower than a year earlier, marking the thirteenth consecutive annual decrease. The construction market material prices for new housing increased 0.7%, with repair and maintenance also increasing 0.7% and other new work falling by 2.3% in the year to June 2024.
House price growth persists amid rising mortgage approvals and declining transactions
The HMRC report that in July the number of property transactions in the UK totalled 90,630, 0.6% lower than the 91,290 seen in June, and is 7.3% higher than a year earlier. This marks the second consecutive fall in property transactions, which was expected due to the slowdown in mortgage approvals since Spring as mortgage rates rose slightly. Alongside this, the Bank of England report that in July, the number of mortgages approved for house purchase was 61,985, which is 2.3% higher than June and marks the second consecutive month that mortgage approvals have now risen.
Nationwide report that in August 2024, UK house prices declined by 0.2% compared to July, but annual growth rose to +2.4%, up from +2.1% in July, marking the highest annual increase since December 2022. Despite this growth, house prices remain about 3% below their 2022 peak. The housing market continues to show resilience despite high interest rates impacting buyer affordability. And Halifax report that in July 2024, UK house prices rose by 0.8%, marking the highest monthly growth since January 2024, following three months of relatively flat price movements. Annual house price growth also increased to +2.3% in July, up from +1.9% the previous month. Despite the positive trend, challenges remain with affordability and limited property availability, with the housing market expected to maintain modest growth through the remainder of the year. Finally, data from the ONS and Land Registry shows that UK house price prices rose 0.5% in June when compared to May and that annual prices rose by 2.7%.
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