The 19th of July or ‘Freedom Day’ saw the lifting of the final coronavirus restrictions across England. Recent months have been characterised by historically high volumes of buyer activity which was fuelled by the ‘race for space’. However compared to previous months, economic activity has started to show signs of cooling. In view of this, CrowdProperty reviews the latest market commentary and what this means for the sector going forward.
According to Halifax, the housing market activity has been slower compared to previous months as the average house price inflation now stands at 7.6% compared to 8.7% in June. Overall there has been a smaller monthly increase in prices compared to the previous month, as Halifax now report a 0.4% increase, which is a further £1,122 added to the value of the average property. On average, the housing prices now stand at just over £261,000, which is slightly below May’s peak however they are still £18,500 higher compared to last year.
The latest industry figures show instructions for sale are falling and estate agents are experiencing a drop in their available stock. Russell Galley, Managing Director, Halifax commented that “this general lack of supply should help to support prices in the near-term, alongside the strong customer demand.” The July’s housing data shows that there is a clear north and south divide as Wales continues to remain one of the key areas where prices have increased the most- an annual price increase of 13%. Similarly, Yorkshire are experiencing on average an 11% increase, which is the highest in 16 years. Zoopla commented that price growth for flats is down 0.5% in London during the past 12 months, which is reflective of people’s continued need to find homes with more space.
With the 0% stamp duty holiday only applying to the first £250,000, activity is expected to slow over the coming months. Part of this slowing will be down to estate agents no longer having the quantity of housing stock. However people’s desire for more space will sustain the elevated levels of activity to some extent. Therefore, Savills now predict that by the end of 2021, house price growth across the UK is expected to have reached 9.0%.
Russell Galley, Managing Director of Halifax reiterated this view, stating: “overall, assuming a continuation of recent economic trends, we expect the housing market to remain solid over the next few months, with annual price growth continuing to slow but remaining well into positive territory by the end of the year.”
This slight decrease in activity is seen across the sectors as the latest data from IHS Markit also reported that the construction industry is slowing for the first time since the start of lockdown. Although output is still on the rise, it has been the slowest since February. Now, the UK Construction PMI® Total Activity Index is slightly lower, 58.7 compared to last month’s 66.3. Firstly, companies are citing the main difficulties to be surrounding the stretched business capacity as they struggle to keep pace with the recent surge in demand for construction projects. Shrinking sub-contractor availability continues to put a strain on output because some EU workers have been returning home due to the pandemic which has further cut the availability of workers. IHS Markit report “the latest decline in sub-contractor availability was the second-fastest since the survey began in 1997, exceeded only by that seen during the lockdown in April 2020.”
To combat this, the latest figures show that constructions firms continued to hire staff at a strong pace. Overall construction output has begun to slow but reports suggest that this is down to the lack of transport availability, port congestion, and Brexit trade frictions rather than decreased demand.
Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, commented: “businesses were also unable to expand on staff capacity, where even the most prolific hiring periods since 2014 was insufficient for builders’ ability to complete work in hand.”
Despite the momentum dropping across all sectors, inflation of raw materials remains a large issue for the UK construction industry. The global recovery of the industry has particularly put a strain on materials such as copper, cement and steel.
Martin Beck, senior economic advisor to the EY ITEM Club commented that, “supply-side challenges in the face of robust demand should give construction firms the impetus to innovate and boost efficiency in a sector which has struggled to grow productivity over the last 20 years.”
The rise in COVID-19 inflections has caused growth outlook to become less clear as there is concern about people feeling discouraged about going out, such as eating in restaurants. However EY ITEM Club commented that the governments revaluation of self-isolation rules has mitigated the worry about the economy making a faster recovery. Therefore they now predict that the expected GDP will expand by an above-consensus of 7.6% this year.
Initially there was concern surrounding the levels of employment as government schemes have begun to unwind. However rapid employing of people to combat the labour shortages reflect the rising order and confidence regarding the near-term outlook. EYITEM Club report that overall the outlook for the construction sector looks healthy.
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