Construction Market Overview June 2024

Construction Market Overview: June 2024

UK Construction sees a turbulent start to 2024, with optimistic growth forecast through to 2026

The ONS have published their construction output data for April 2024, showing that in April monthly construction output declined by 1.4% in volume terms, led by falls in both new work (1.9%) and repair and maintenance (0.8%). These falls were largely because of heavy rainfall and strong winds. Additionally, in the three months to April, construction output further declined by 2.2%, marking the continuation of a six-month downward trend, driven by decreases in both new work (2.8%) and repair and maintenance (1.4%).

In May 2024, the UK construction sector witnessed its fastest growth in two years, with the S&P Global UK Construction PMI climbing to 54.7 from 53.0 seen in April. This growth was driven primarily by increase in activity across all monitored sectors, with the commercial sector in particular reaching a two-year high in growth. Additionally, business confidence also reached a three-month high, buoyed by optimistic expectations of economic improvements and potential interest rate reductions.

Glenigan have released their mid-year Construction Industry Forecasts for 2024-2026 indicating that after a 3.0 % increase in the value of underlying (under £100m) project starts for 2024, construction will see continuing rises of 7.0% in 2025 and a further 6.0% in 2026. Assuming a Labour majority is returned in the general election and interest rates fall over the summer, this forecast predicts that new project starts in private housing, offices, hotel & leisure, retail and industrial sectors will all increase from 2025 as investor confidence returns and political uncertainty fades. However, in the public sector, activity is likely to be held back in the short term ahead of a new government’s Spending Review.

The DBT construction material price index for all work remained flat (0.0%) month-on-month in April 2024 and was 3.1% lower than a year earlier, marking the eleventh consecutive annual decrease. Construction material prices for new housing decreased 0.2%, with repair and maintenance and other new work falling by 1.0% and 4.6%, respectively in the year to April 2024. 84,200

Rising property transactions and moderate growth in house prices amid affordability pressures

The HMRC report that in April the number of property transactions in the UK totalled 90,430, 4.6% higher than the 84,200 seen in March, marking the fourth consecutive monthly rise in property transactions. And year-to-date (January-April), UK property transactions in 2024 were 3.9% lower than in 2023, 22.0% lower than in 2022 and 38.6% lower than at the peak in 2021. Alongside this, the Bank of England report that in April, the number of mortgages approved for house purchase was 61,140, which is broadly flat (-0.2%) compared with March after five consecutive rises in mortgage approvals. However, mortgage approvals in April were also 25.8% higher than a year ago.

Nationwide report that annual house price growth picked up slightly in May as it grew to +1.3% from the +0.6% seen in April and is showing signs of resilience in the face of ongoing affordability pressures following the rise in longer term interest rates in recent months. And Halifax report that on an annual basis house price growth increased to +1.5% for May, from the +0.1% seen in April. On a monthly basis, Nationwide report that house prices increased by 0.4% in May. Halifax report that monthly house prices decreased 0.1% in May, remaining largely stable since April. Finally, data from the ONS and Land Registry shows that UK house price prices rose 0.3% in April when compared to March and that annual prices rose by 1.1%.

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