Green Shoots Of Housing Recovery For 2024?

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The construction sector rate of slump was the slowest since the current phase of decline began. While there was a good rise in repair, maintenance and improvement in the last quarter of 2023 according to the ONS.

A sustained slump in house building was the main factor holding back construction output according to the S&P Global UK Construction Purchasing Managers’ Index whose survey respondents put down to (as they had all year) elevated interest rates and subdued confidence among developer clients.

Improving supply conditions continued in December, with delivery times for construction items shortening for the tenth month in a row. Price discounting among suppliers contributed to a moderate fall in average input prices across the construction sector at the end of 2023.

Commercial

Commercial construction meanwhile declined only modestly but the speed of the downturn accelerated to its fastest since January 2021. Some firms noted that concerns about the domestic economic outlook, alongside elevated borrowing costs, had led to greater caution among clients.

Comment

Tim Moore, an economics director at S&P Global Market Intelligence, which compiles the survey says: "Construction companies experienced another fall in business activity at the end of 2023 as weak order books meant a lack of new work to replace completed projects. House building was the worst-performing area of construction activity, yet even in this segment there were signs that the downturn has started to ease.

"Elevated borrowing costs and a subsequent slump in market confidence were the main factors leading to falling sales volumes across the construction sector in the second half of 2023. Survey respondents also continued to cite worries about the broader UK economic outlook, especially in relation to prospects for commercial construction.

"However, expectations of falling interest rates during the months ahead appear to have supported confidence levels among construction companies. December data indicated that 41% of construction firms predict a rise in business activity over the course of 2024, while only 17% forecast a decline. This contrasted with negative sentiment overall at the same time a year earlier."

Brendan Sharkey, a aonstruction and real estate specialist at MHA, says: “December’s PMI data shows another decline, continuing the theme from last year. There weren’t many construction businesses that escaped unscathed in 2023. However, while the construction industry is likely to have a slow start as we go into Q1 2024 and there may be some casualties, we will begin to see green shoots of recovery as the year progresses.

”The expectation of a cut in interest rates is positive news for housebuilders. Some will already have factored that in, but those that haven’t will be fast-forwarding into planning phases, which will help create momentum and a more buoyant mood than last year.”

Picture: Housebuilding's slump has slowed – what will happen in 2024?

Article written by Cathryn Ellis
11th January 2024

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