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Construction work hits 9-month high, housebuilding falls: S&P

Construction work rose at the fastest rate in nine months in February, but this was tempered by a fall in housing activity for the third month running, data from S&P Global/CIPS shows.

UK building projects hit a “robust” 54.6 mark last month, up from 48.4 in January and above the neutral 50.0 threshold for the first time in three months, according to the latest S&P Global/CIPS Construction Purchasing Managers’ Index.

This is highest reading since May, ending two months of decline.

Commercial construction was the best-performing area, hitting a nine-month high, at 55.3, with civil engineering activity also returning to “modest” growth in February, at 52.3.

However, firms noted a fall in residential work for the third month in a row, which came in at 47.4, although companies said, “the speed of the downturn has eased since January”.

Housebuilding businesses said subdued market conditions were due to high interest rates, which caused cutbacks to new housebuilding projects in anticipation of weaker demand.

Across the sector, total new work picked up in February, the report says, leading to an improvement in order books for the first time since November.

It adds that overall business expectations for the year ahead improved further from the 31-month low recorded in December. Around 46% of the survey panel anticipate a rise in construction activity over the coming 12 months, while only 13% predict a decline.

The survey also pointed to the least widespread supplier delays since January 2020 and the slowest round of purchase price increases since November 2020.

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S&P Global Market Intelligence economics director Tim Moore says: “Business activity in the UK construction sector returned to growth during February as a rebound in commercial work and civil engineering output helped to compensate for housing market weakness.”

MHA head of construction and real estate Brendan Sharkey adds: “Today’s PMI reveals that February was a very strong month for UK construction.

“However, in reality, the picture is very mixed. Some construction firms are coping well and some aren’t. At this time of year for many regional builders, a lot rides on local authorities.

“Some are pushing lots of work through before they close their 2022/23 books in March. This is boosting activity but the overall picture is a bit gloomy when looking forward.

He points out: “The London market feels like it is heading for a slowdown and all the big house builders forecast contraction over the next year.

“One or two well-established construction firms have already declared themselves insolvent. It looks like we’re straining to avoid a recession with new orders declining and the prospect of more interest rate rises.”

Beard finance director Fraser Johns adds: “After a two-month period of decline, it’s certainly encouraging to see a healthy rise in activity across the construction sector in February. Supply chain pressures softening and recession fears easing have been key drivers in boosting activity, new order levels and overall confidence.

“Last year, material costs in particular were much larger than expected, leading to a significant squeeze on live projects. It was one of many reasons why those without a strong balance sheet had nowhere to hide in 2022.

“So far this year though, increases – while still present, have started to come down and are closer to expectations, providing less volatility than in the previous 12 months.

Johns says: “One area that is expanding is more specialised infrastructure projects in the likes of healthcare, education and local authority for both local and central government. This has certainly been the case at Beard.

“Although the economic outlook is far from rosy, it is less doom and gloom than what we have come to expect. This is helping to shift sentiment and encourage more clients to commit to projects once again.”

“While this is all positive news, we are certainly not out of the woods yet, especially with high energy costs remaining a key factor. Businesses across the construction sector must still remain agile, especially those that rely on housebuilding projects.

“With high interest rates still stifling housing activity, residential housebuilding remained a weak spot, decreasing for a third month running.”

By Roger Baird

Source: Mortgage Strategy

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Housebuilding surges but insufficient housing supply continues to drive up house prices

The number of sites being developed for new homes increased 15% in the second quarter of the year compared to the corresponding period in 2021, the latest data shows.

Figures from the Office for National Statistics reveal a sharp rise in housebuilding starts in April to June of this year, with 51,730 homes under construction.

However, the increase came after a major slump in construction levels during the Covid pandemic (2020 to 2021) when the drop in housebuilding levels was on a par with the 2008 financial crisis that adversely affected housebuilders and the housing market. Net increase in dwellings in the UK dropped 11% in 2021-2020 compared to 2019-2020 as construction recovers following the Covid-19 pandemic.

The latest figures show that the number of completed homes rose 6% compared to April, May and June last year, to 44,940. This was also a 3% increase on the previous quarter.

Despite the improvement in housebuilding levels, the volume of new build homes being delivered continues to fall well below the UK government’s target to develop 300,000 homes each year.

The shortage of housing stock continues to place upward pressure on house prices in many parts of the country.

Residential property prices increased by 15.5% in July, according to the ONS, although analysts expect price growth to ease in the coming months.

Rhys Schofield, managing director at mortgage broker Peak Money, commented: “If you cut through the numbers that look big on paper, the UK needs to build 340,000 new homes a year until 2031. The Government’s own target is 300,000 a year.

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“These latest numbers all fall well short, meaning that house prices can only be forced in one direction. With the lack of urgency around housebuilding, having a place to call your home is becoming increasingly out of reach for many people.”

The price of construction materials in the UK is also thought to be having a negative impact on the housebuilding sector. UK construction materials prices in July 2022 were 24.1% higher than a year earlier, according to the ONS.

Edgar Rayo, chief economist at property finance company Finanze, commented: “These newly released figures highlight the build-cost inflation battering the industry.

“Soaring construction costs brought about by supply chain issues and fuel price hikes continue to squeeze the profit margins of the UK’s property developers.

“As we track the imbalance in the housing market, we still observe the very high demand for housing, which continues to put pressure on prices.”

By MARC DA SILVA

Source: Property Industry Eye

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140 more homes earmarked for Ledbury

More homes are being planned for a growing Herefordshire town.

Land to the west of the Hawk Rise development off Leadon Way, Ledbury, has been acquired by developers Vistry Group and is earmarked for 140 new houses.

The homes would be built under the Bovis Homes brand, which is part of the Vistry Group.

The 22-acre site already has outline planning permission for residential development and more detailed plans have been submitted to Herefordshire Council.

Developers say there will be a mix of properties on the site, with two, three, four and five-bedroom houses for private sale.

There will be 84 properties available for private sale in total, as well as 56 affordable homes available to local people through rent or shared ownership. The plan includes new public open space.

Supriya Ray, managing director of Vistry Group’s Cotswolds region, said: “This development will provide not only much-needed new housing to the area but will also create a vibrant new neighbourhood in the lovely market town of Ledbury.

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Bovis Homes development would include new public space
“As well as constructing 84 new properties for private sale, we will also be providing 56 affordable homes for local people which will allow them to stay in the area and remain close to family and friends.

“The selection of new homes at the site will appeal to a wide range of house-hunters including first-time buyers, growing families who need more space and people downsizing. It will be a sustainable development which is designed to blend in with and embrace its natural surroundings.”

Plans for the development’s public open space include a village green, children’s play areas and a picnic area, as well as meadowland and extended woodland.

Existing hedgerow and trees will be retained wherever possible on the site and complemented by new planting.

Mr Ray said: “We have liaised with Herefordshire Council on this project and hope to receive approval for our detailed plans in September, which would enable us to forge ahead with the construction programme.

“If all goes well, we would hope to start constructing the first homes in April 2023 and to have the first residents move in before the end of that year.”

By Phil Wilkinson-Jones

Source: Hereford Times

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Plans to build 750 homes on Carlisle greenfield site

Up to 750 new homes could be build on greenfield land near Carlisle.

Chorley-based property company, Northern Trust, agreed a planning promotion deal with the private landowner on land at St Cuthbert’s Garden Village, in Carleton, Carlisle.

The land, which extends to 176 acres, is currently a green field site in agricultural use.

The plans for the site will be promoted in two separate phases.

David Jones, senior land manager at Northern Trust, said: “We are actively looking for further residential and commercial land opportunities to purchase or promote throughout the UK, so we are pleased to be working with this private landowner on facilitating the plans for development of this strategic site to provide much needed new homes for the area and continue the investment for the benefit of the local community.”

Northern Trust and the landowner are working alongside Savills’ planning and development teams in the North West to secure the planning and to agree a land deal, respectively.

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Ed Rooney, Savills’ North West development director, said: “The Carlisle housing market is a huge opportunity for North West house builders with the shortage of land elsewhere in the region.

“Carlisle is set for significant economic growth aided by the high quality housing and environment provided by the Garden Village and our client’s land at Carleton is a key part of the overall housing masterplan to the south of the city.”

Jonathan Ainley, associate director in the planning team at Savills in the North West, said: “We have worked on behalf of the landowner over the last five years to promote this site and now look forward to the next phase, working with Northern Trust to progress a Garden Village at Carleton in the short term.

“It forms part of the largest Garden Village in the country and we are confident it can deliver high quality new homes, with excellent public spaces and connectivity, whilst also supporting Carlisle City Council in its ambition to achieve economic growth.”

Northern Trust has a land bank of more than 5,000 acres.

By Neil Hodgson

Source: The Business Desk