Construction Market Overview: September 2024
A monthly round up of key Construction Market Data and Forecasts including statistics from industry commentators and influencers.
UK Construction growth slows in August following a dip in output in July
The ONS have published their construction output data for July 2024, showing that monthly construction output decreased by 0.4%, following a 0.5% increase in June. This decline was driven by a 0.2% fall in new work and a 0.7% fall in repair and maintenance. Overall, five of the nine key construction sectors experienced decreases, with private commercial new work and private housing repair and maintenance seeing the largest drops, falling by 2.4% and 1.7%, respectively. However, construction output grew by 1.2% over the three months to July 2024, supported by increases in both new work (1.6%) and repair and maintenance (0.8%), with notable growth in May (1.7%) and June (0.5%).
In August, UK construction experienced solid growth, though the pace of expansion slowed compared to July, as the S&P Global UK Construction PMI® fell to 53.6 from the 55.3 seen in July. However, this signaled continued growth in the industry, with robust new order growth and improved economic conditions supporting the trend. Commercial activity remained the top-performing sector, though it saw slower growth than earlier months, while residential work accelerated at its fastest pace since September 2022, driven by improving market conditions and lower borrowing costs. Overall, business optimism remains strong, with 50% of companies in the survey expecting output to rise over the coming year.
The DBT construction material price index for all work decreased 0.3% month-on-month in July 2024 and was 1.0% lower than a year earlier, marking the fourteenth consecutive annual decrease. Construction material prices for new housing increased 0.4%, with repair and maintenance also increasing 0.5% and other new work falling by 1.9% in the year to July 2024.
ISG, one of the UK’s largest construction firms, has entered administration, leading to the immediate cessation of its operations and the loss of around 2,400 jobs. ISG’s collapse has left many subcontractors and SMEs in financial jeopardy, and industry giants like Balfour Beatty are taking steps to prevent further fallout. This also raises concerns about the impact on hundreds of subcontractors and the wider construction industry, as many businesses across the supply chain face incredible challenges and uncertainty in the coming months.
Annual house price growth remains strong but reflects the impact of weaker prices a year ago
The HMRC report that in July the number of property transactions in the UK totalled 90,630, 0.6% lower than the 91,290 seen in June, and is 7.3% higher than a year earlier. This marks the second consecutive fall in property transactions, which was expected due to the slowdown in mortgage approvals since Spring as mortgage rates rose slightly. Alongside this, the Bank of England report that in July, the number of mortgages approved for house purchase was 61,985, which is 2.3% higher than June and marks the second consecutive month that mortgage approvals have now risen.
Nationwide report that in August 2024, UK house prices declined by 0.2% compared to July, but annual growth rose to +2.4%, up from +2.1% in July, marking the highest annual increase since December 2022. Despite this growth, house prices remain about 3% below their 2022 peak. The housing market continues to show resilience despite high interest rates impacting buyer affordability. And Halifax report that in August 2024, UK house prices rose by 0.3%, following on from the 0.9% rise seen in July which marked the highest monthly growth since January 2024. Annual house price growth also increased to +4.3% in August, up from +2.3% the previous month, marking the strongest annual rate since November 2022. Despite the positive trend, challenges remain with affordability and limited property availability, with the housing market expected to maintain modest growth through the remainder of the year. Finally, data from the ONS and Land Registry shows that UK house price prices rose 0.6% in July when compared to July and that annual prices rose by 2.2%.
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