Construction Market Overview May 2024

Construction Market Overview: May 2024

UK Construction sees varied performance and mixed results in early 2024

The ONS have published their construction output data for March 2024, showing that in March monthly construction output declined by 0.4% in volume terms, led by falls in both new work (0.7%) and repair and maintenance (0.1%). Infrastructure new work and non-housing repair and maintenance saw the biggest decreases at the sector level, with declines of 3.6% and 2.4%, respectively. Additionally, the first quarter of 2024 saw a 0.9% contraction in construction output compared to the last quarter of 2023, driven primarily by a 1.8% decrease in new work, despite a slight 0.3% increase in repair and maintenance.

In April 2024, the UK construction sector witnessed its fastest growth since February 2023, with the S&P Global UK Construction PMI climbing to 53.0 from 50.2 in March. This growth was driven primarily by strong performances in the commercial and civil engineering sectors, which saw substantial expansions. Despite seeing a downturn in activity house building benefited from improved supplier lead times and increased material availability. New business volumes continued to rise for the third consecutive month, although at a modest rate. Overall, the survey respondents showed an optimistic business outlook for the coming year, buoyed by expectations of interest rate cuts in the latter half of 2024.

The CPA have released their Spring 2024 Construction Industry Forecasts indicating that UK construction will face a downturn for 2024 with output predicted to fall by 2.2% before recovering with 2.1% growth in 2025 and 3.6% in 2026. Private housing, particularly new builds and repair and maintenance is expected to see a significant decline, while the industrial and infrastructure sectors remain robust. Key risks include interest rate fluctuations and their impact on mortgage rates, which could either hinder or help the recovery. These forecasts anticipate mixed outcomes across several different construction sectors, influenced by uncertain economic conditions and future government spending decisions.

The DBT construction material price index for all work increased 0.4% month-on-month in March 2024 and was 2.3% lower than a year earlier, marking the tenth consecutive annual decrease. Construction material prices for new housing decreased 0.2%, with repair and maintenance and other new work falling by 0.9% and 4.0%, respectively in the year to March 2024.

Mixed signals for the housing market as summer approaches

The latest NHBC New Home Statistics Review for Q1 2024 indicates a significant downturn in the UK housing sector. New home registrations fell by 20% compared to Q1 2023, with 21,967 new homes registered, including 13,633 in the private sector and 8,334 in the affordable and build-to-rent sectors. The number of completions also saw a decrease, with 26,240 homes completed, representing a 13% decline from the previous year. Despite this, there are tentative signs of growth in new home registrations month-on-month, suggesting a potential stabilisation or modest recovery for the remainder of 2024.

The HMRC report that in March the number of property transactions in the UK totalled 84,200, 1.0% higher than in February, marking the third consecutive monthly rise in property transactions and were now 6.0% lower than compared to a year earlier. And the Bank of England report that in March, the number of mortgages approved for house purchase was 61,300, an increase from the 60,500 seen in February, now the highest number of net approvals since September 2022 and marking the sixth consecutive month in which mortgage approvals have risen.

Nationwide report that annual house price growth slowed for April as it decreased to 0.6% from the +1.6% seen in March, reflecting ongoing affordability pressures, with longer term interest rates rising in recent months. However, Halifax report that on a quarterly basis house prices grew by +0.8%, with annual house price growth increasing to +1.1%, from the +0.4% seen in March. On a monthly basis, Nationwide report that house prices decreased by 0.4% in April, making house prices just 4.0% below the all-time highs recorded in the summer of 2022. Halifax report that monthly house prices increase 0.1% in April, following on from the fall of 0.9% seen in March. Finally, data from the ONS and Land Registry shows that UK house price prices rose 0.7% in March when compared to February and that annual prices rose by 1.8%.

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