The latest S&P Global UK Construction PMI® has just been published and, though business activity growth gained momentum across the UK construction sector in April, largely due to solid rates of expansion in the commercial and civil engineering segments, it revealed a setback for house building activity in April (index at 47.6).
The report stated: “April data pointed to a moderate fall in residential building work, although the rate of decline was the steepest since January.
“Construction companies again noted sluggish market conditions and the impact of elevated borrowing costs.”
Free news agency Newspage asked experts for their views.
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Ben Perks, managing director at Orchard Financial Advisers:
“As the burden of high-interest rates continues to bite borrowers, the demand for new build property is definitely coming down. With reduced demand, construction companies are unsurprisingly looking at the viability of schemes. Until the Bank of England make a reduction to the base rate, this will continue to be the case. The property industry needs revitalising and the new build sector is no different.”
Ranald Mitchell, director at Charwin Private Clients:
“Confidence amongst house builders is shaken to the foundations as interest rates continue to rise, leaving them less confidence that they can sell their product at a reasonable price. House builders are shrewd, and they’ll want more concrete economic conditions before resuming construction in volume.”
Samuel Mather-Holgate, independent financial advisor at Mather and Murray Financial:
“Construction has been in a rut for years, and this will only improve following a new government with fresh ideas how to stimulate the market. Of course, falling rates will help too and the combination of cheaper money and fresh incentives may really boost the sector.”
Tracey Dixon, broker at Pure Mortgage and Protection:
“High-interest rates have put a damper on demand for new-build properties, impacting the construction industry. A potential decrease in the Base Rate could help revive demand, but the overall industry’s revitalisation likely depends on additional factors.”
Graham Cox, director at Self-Employed Mortgage Specialist SEMH:
“Until first-time buyers are able to afford to purchase new builds and other properties, the house building market will be stuck in the doldrums. For years Help to Buy, combined with dirt-cheap mortgages, was the golden ticket for house builders. Now only lower house prices or mortgage rates will stimulate demand. Ideally both.”
Chris Barry, director at Thomas Legal:
“The new build residential market will struggle as developers’ profit continues to erode.The cost of borrowing is high and future resale figures look uncertain so developers need to secure land acquisitions at lower prices but land owners haven’t adjusted to this yet. I’m sure land values will decline over time but right now, asking prices still seem to be at a premium.”
