Construction Market Overview - April 2024

Construction Market Overview: April 2024

UK Construction shows signs of stabilisation alongside cautious optimism going forwards

The ONS have published their construction output data for February 2024, showing that in the three months to February, construction output decreased by 1.0%, driven solely by a 3.0% fall in new work, offset slightly by a 1.6% increase in repair and maintenance. February also saw a 1.9% monthly decrease in construction output, reversing the 1.1% increase seen in January. This downturn was primarily due to notable declines in both new construction projects and repair and maintenance work, which fell by 2.3% and 1.4%, respectively. Contributing to these declines was heavy rainfall causing delays and reduced activity across the sector.

March data from S&P Global/CIPS UK Construction PMI shows slight recovery in the UK construction sector, marking the end of a six-month period of decline. The Construction PMI index increased to 50.2 in March from the 49.7 in February, slightly above the neutral threshold (50.0), suggesting a modest expansion. March also saw the strongest increase in new orders since May 2023, driven by improved economic outlook and financial conditions which boosted sales pipelines and business enquiries. Despite these positive developments, the construction sector remains cautious but optimistic about future business activity as concerns about political uncertainty and financial pressures continue to dampen the optimism seen earlier in the year.

The latest RIBA Future Trends Survey for March 2024 indicates a cautious stabilisation in workloads amongst Architects. For the first time since July 2023, the Workload Index has risen to a balance of zero, from February balance figure of -3, ending eight months of negative sentiment. This suggests an overall expectation among architects of steady workloads. However, the outlook remains mixed, with 24% of practices anticipating a decrease and an equal percentage expecting an increase, while 52% predict stability.

The DBT construction material price index for all work increased 0.1% month-on-month in February and was 1.9% lower than a year earlier, marking the ninth consecutive annual decrease. Construction material prices for new housing decreased 0.6%, with repair and maintenance and other new work falling by 1.4% and 3.0%, respectively in the year to February 2024.

Mixed signals amidst a gradual recover for the housing market

The HMRC report that in February the number of property transactions in the UK totalled 82,940, 1.2% higher than in January, and 11.9% lower than compared to a year earlier. Property transactions have now risen marginally for two consecutive months, after a lag, following the falls in mortgage rates from August 2023 and the rises in mortgage approvals that occurred from October 2023. And the Bank of England report that in February, the number of mortgages approved for house purchase was 60,383, a significant increase from the 55,227 seen in January, and now 7.7% higher than January 2023, marking the fifth consecutive month in which mortgage approvals have risen.

Nationwide report that annual house price growth improved once again for March as it increased to +1.6% from the +1.2% seen in February, showing that activity has picked up from the low levels towards the end of 2023, but remains subdued by historic standards. However, Halifax report that on a quarterly basis house prices grew by +2.0%, with annual house price growth slowing to +0.3%, from the +1.6% seen in February. On a monthly basis, Nationwide report that house prices decreased by 0.2% in March following the 0.7% rise seen in February and the subdued growth seen at the end of 2023 going into 2024. Halifax report that monthly house prices decreased 1.0% in March, following on from five consecutive months of growth. Finally, data from the ONS and Land Registry shows that UK house price annual inflation stood at -0.2% in the twelve months to February 2024, compared to the revised estimate of -1.3% seen in the year to January 2024.

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