Construction output sees another drop but builders remain upbeat

Lovell generic housebuilding imageOutput from the UK construction sector fell unexpectedly for a third consecutive month in September, according to data from the Office for National Statistics (ONS).

But ndustry bosses said they remain optimistic despite the official figures showing that construction output dipped 0.2 per cent in September, after a sharp 3.4 per cent decline in August and against expectations for a modest rise.

On an annual measure, output dropped 1.6 per cent in September, the biggest decline for more than two years.

For the third quarter as a whole, new housing construction slumped 4.3 per cent, its biggest decline in just over three years, reflecting a drop in ¬housing starts in the previous quarter around the time of May’s national election.

On Thursday, the Bank of England’s chief economist Andy Haldane described the UK’s housing market as “broken”, highlighting the long-term lack of construction of new homes particularly by local councils.

Gordon Reid, business development manager for Kier Construction in Scotland said: “These latest ONS findings reflect what all those operating in the sector have long known: that challenges will continue to present themselves.

“However, while a downturn in residential housing can be attributed to this reduction, other sectors, like that of healthcare, have actively increased.

“It is a sector within which Kier has been particularity active during the past few months. Our position as one of five principal supply chain partners on the NHS’ £600m Health Facilities Scotland framework for Capital Development in Scotland has enabled us to illustrate our capabilities across significant healthcare projects throughout the country, further cementing our position as a sector leader.

Gordon Reid
Gordon Reid

He added: “Taking our own successes over the past few months as the marker, we fully expect these ONS figures to grow as we close 2015 and move into next year.”

That optimistic outlook was joined today by Taylor Wimpey as the firm projected a seven per cent increase in the number of houses it expects to build in Scotland this year.

The company said consumers around the UK still appear to have great confidence in the housing market, which is being helped by low interest rates and a competitive mortgage market.

Sales across the summer were said to be “excellent” with the pace increasing into the autumn.

That helped it to report a record order book of £2.1 billion, representing more than 8500 homes.

According to the company, it has met its target for completions in 2015 and has sold 27 per cent of its target for next year.

In Scotland, Taylor Wimpey has built around 1,000 homes on average in recent years.

Finance director Ryan Mangold said the Scottish market had performed well in 2015 even though there remained uncertainty about further provision of Help to Buy funding.

He said: “We think our volume growth in Scotland year-on-year is going to be a little bit less than seven per cent.

“For the rest of the UK it will be a little more than seven per cent but it is not a huge difference between the two marketplaces.

“From a pricing perspective it is more driven by quality locations than by market fundamentals.”

Additional detail on Help To Buy funding in Scotland is expected within the next few weeks after the scheme ran out of money in May.

Mr Mangold welcomed any further Help To Buy injection but believes the wider mortgage market offers a wide range of choice.

He also stated that consumers are becoming increasingly “resilient” in the face of any potential rise in interest rates and said: “Participation in Help To Buy when it is available in Scotland seems to be much higher than the rest of the UK.

“That could simply be the stop-start nature of it leading to pent up demand and making it an effective selling tool.

“The mortgage market more widely has improved dramatically. If you want a 90 per cent loan to value on any property you can get a huge amount of choice and very sensible interest rates.”

Taylor Wimpey said building costs had increased about five per cent, mainly as a result of higher labour charges.