Construction Market Overview: January 2025
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Construction output growth rebounds in November, but loses momentum for the end of 2024 Amidst economic uncertainty
The ONS have published their construction output data for November 2024, showing that monthly construction output grew by 0.4% in November 2024, rebounding from a revised 0.3% decline in October. This growth was driven by increases in both new work (0.3%) and repair and maintenance (0.5%). Five of the nine key sectors saw growth, with private commercial new work and non-housing repair and maintenance showing the greatest growth, rising by 3.1% and 1.1%, respectively. And in the three months to November, construction output increased by 0.2%, driven solely by a 0.4% rise in new work, while repair and maintenance remaining flat (0.0%) over the period.
In December, UK construction activity saw a loss of momentum in growth, as the S&P Global UK Construction PMI® fell to 53.3 from 55.2 seen in November, but continues to show solid growth at a reduced rate of expansion. Commercial building led growth, followed by civil engineering, while housebuilding activity declined for the third consecutive month, impacted by subdued demand, elevated borrowing costs, and weak consumer confidence. And total new work saw its slowest growth since June 2024. Business optimism rebounded after a post budget slump in November, however concerns about the gloomy economic outlook for 2025 and tighter capital budgets continue.
The DBT construction material price index for all work decreased 0.2% month-on-month in November 2024 and was unchanged at 0.0% compared to a year earlier, bringing an end to a run of annual decreases. Construction material prices for new housing increased 1.3%, with repair and maintenance also increasing 0.7% and other new work falling by 1.2% in the year to November 2024.
Housing market remains resilient as 2024 ends, as price data shows mixed trends going into 2025
The December 2024 UK Residential Market Survey from RICS reports modestly positive sales activity. However, a challenging macroeconomic environment, including rising bond yields and lending rates, could hinder growth going forwards. New buyer inquiries saw a slight slowdown, though agreed sales showed a modest improvement. House prices continued to grow, with Northern Ireland, Scotland, experiencing the strongest growth and national prices are expected to climb further in 2025. Despite cautious optimism for 2025, concerns over supply shortages and economic pressures persist.
The HMRC report that in November the number of property transactions in the UK totalled 92,640, 7.9% lower than the 100,580 seen in October, and 12.9% higher than a year earlier. Alongside this, the Bank of England report that in November, the number of mortgages approved for house purchase was 65,720, which is 3.5% lower than October, marking the first fall in mortgage approvals after rising for five consecutive months.
Nationwide report that in December 2024, UK house prices increased by 0.7% compared to November, with annual growth increasing to +4.7%, from the +3.7% in seen in November marking a strong finish to 2024. And Halifax report that in December 2024, UK house prices fell by 0.2%, following five consecutive monthly increases. However, annual house price growth slowed to +3.3% in December, down from +4.7% the previous month. Finally, data from the ONS and Land Registry shows that UK house price prices fell 0.4% in November when compared to October, but annual prices rose by 3.3%.
Overall, in 2024 the UK housing market demonstrated resilience amid affordability challenges, with mortgage approvals surpassing pre-pandemic levels and annual house price growth reaching nearly 4% by November. And looking ahead, Nationwide forecasts house price increases between 2% and 4% in 2025, with anticipated stamp duty changes in April expected to boost transactions in early 2025, followed by a potential slowdown. However, easing affordability constraints driven by modestly lower interest rates and earnings expected to outpace house price growth, are likely to support gradual strengthening in housing market activity throughout the year.
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