Construction Market Overview: November 2024
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
Mixed signals for UK construction showing positive growth despite continuing market pressures
The ONS have published their construction output data for September 2024, showing that construction output increased by 0.8% in Q3 2024, driven by a 2.0% rise in new work despite a 0.6% decline in repair and maintenance. Alongside this monthly construction output grew marginally by 0.1%, with a 0.4% increase in repair and maintenance offsetting a 0.2% fall in new work. However, total construction new orders fell sharply by 22.0% (£2,722m) in Q3 2024, largely due to significant declines in private new housing (-31.3%) and private commercial work (-20.8%) when compared to Q2 2024. Meanwhile, construction output prices grew at an annual rate of 2.0% in the 12 months to September 2024.
In October, UK construction activity saw a slowdown in growth, as the S&P Global UK Construction PMI® fell to 54.3 from the 29-month high of 57.2 seen in September and remains above the neutral 50.0 threshold. Civil engineering led the sector, supported by strong demand for renewable energy projects, while commercial work grew modestly. Housebuilding, however, saw its first decline since June 2024, due to high borrowing costs and policy uncertainty ahead of the recent autumn budget. Despite softer growth than the two-and-a-half year high seen in September, new orders expanded, driven by improving domestic economic conditions. And business optimism dipped to a ten-month low, reflecting broader economic uncertainties.
Glenigan have published their latest construction industry forecasts for 2025-2026, highlighting a mixed outlook going forwards, with gradual UK economic growth and easing interest rates expected to support construction activity. Private housing starts are projected to grow by 13% in 2025 and 15% in 2026, lifted by improved affordability and government support for SMEs and the rental sector. Public sector investment will rise in the latter half of the forecast period, with increased funding for education, healthcare, and social housing programs. Meanwhile, civil engineering is set to benefit from major infrastructure and utilities projects tied to the governments Net Zero commitments. Despite these positive notes, challenges remain, including delayed planning approvals, high borrowing costs, and uncertainties around public sector projects.
The DBT construction material price index for all work decreased 0.3% month-on-month in September 2024 and was 0.7% lower than a year earlier, marking the sixteenth consecutive annual decrease. Construction material prices for new housing increased 0.3%, with repair and maintenance also increasing 0.2% and other new work falling by 1.8% in the year to September 2024.
Housing market remains resilient and is expected to continue gradually strengthening
The October 2024 UK Residential Market Survey from RICS reports steady improvement in sales activity, with new buyer enquiries marking the fourth month of positive growth and agreed sales also showing modest growth of 9.0% compared to the 5.0% seen in September. House prices continued to grow, with Northern Ireland, Scotland, and London leading the gains in growth. While market sentiment continues to be cautiously optimistic, challenges including high borrowing costs, planning uncertainties, and legislative changes are still having an impact. Looking ahead, expectations for sales and price growth remain positive over the next 12 months, supported by improving market conditions.
Nationwide report that in October 2024, UK house prices increased by 0.1% compared to September, with annual growth falling to +2.4%, representing a modest slowdown from +3.2% in September. And Halifax report that in October 2024, UK house prices rose by 0.2%, marking the fourth consecutive monthly increase. Annual house price growth eased to +3.9% in October, down from +4.6% the previous month, with the average property price now reaching a record high and surpassing the previous peak set in June 200, towards the end of the pandemic era. Finally, data from the ONS and Land Registry shows that UK house price prices fell 0.3% in September when compared to August and that annual prices rose by 2.9%. Overall, the housing market has shown resilience in recent months, even with significantly higher interest rates. As the economy steadily recovers, housing activity is expected to gradually strengthen, supported by easing affordability pressures as modestly lower interest rates combine with earnings growth, outpacing house price increases.
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