Strong growth in the building of new homes and commercial buildings helped the UK’s construction output to improve; showing signs that the industry’s road to recovery is on track.
In December 2013, construction output increased by 6.3% compared with December 2012, up from 2.0% in November 2013. The pattern seen in the quarterly data is repeated in the monthly data, with new work showing growth of 3.4% alongside a slight fall in the output of repair & maintenance -0.2%.
Despite a slow beginning to the year output grew steadily throughout the year and has produced three consecutive quarters of growth for the first time since the third quarter of 2010.The estimated annual volume of construction output in 2013 of £112.6 billion is 3.9% greater than the level recorded during the economic downturn in 2009.
The country’s construction sector accounts for 6.3% of gross domestic product. The Treasury said the figures provided further evidence that the government’s long-term economic plan was working. A spokesman said, “It is particularly encouraging to see that construction of new housing last year was higher than in any of the past six years. The government will continue to work through the plan to deliver economic security for hardworking people.”
The housing sector has been helped by government schemes aimed at helping people buying new homes and by record low interest rates.
One of those schemes is the help to buy scheme, it gives a mortgage guarantee, which helps you buy a home with a deposit of 5% of the purchase price. It is open to both first-time buyers and home movers for new-build and older homes in the UK with a purchase price up to £600,000. It is a scheme designed to encourage lenders to offer more mortgages to those who have sufficient incomes to repay a mortgage, but are struggling to get a deposit together.
On Friday Bellway said nearly a third of reservations had used help to buy, as it upgraded its profit forecast partly thanks to increased demand under the scheme. The house builder said it expected to achieve pre-tax profits of more than £190m in the year to July.
The chief UK and European economist at IHS Global Insight Howard Archer said, “Improving house building is particularly welcome news, given that a shortage of properties is a major factor, repeatedly putting upward pressure on UK house prices.”
When comparing the 2013 annual data with 2012, the output of the construction industry is estimated to have risen by 1.3% and during these 12 months new work increased 2.4%.
Tim Moore, Senior Economist at Markit said, “the UK construction recovery remains on track. The latest data show positive developments on a number of fronts, with job creation rebounding at the start of the year while output and new business growth was the fastest since the summer of 2007.
“Housing activity growth now stands at its strongest for just over a decade, boosted by growing demand for new homes and improving confidence within the UK property market. Meanwhile, strengthening domestic economic conditions spurred greater spending on commercial projects in January. A sharp rise in civil engineering activity completed an impressive showing from all three sub-categories of construction monitored by the survey.”
How much of an impact has the government’s help to buy scheme had on helping first time buyers get on the property ladder?