Private Housing To Lead Construction Growth 2018

Private housebuilding is expected to be the primary growth driver for the construction industry next year, according to the latest Construction Professionals Association (CPA) forecast.

The CPA has predicted that private housing growth will continue, with starts rising by 5.0% this year and 2.0% in 2018.

In the second quarter of 2017, the Help to Buy equity loan scheme was responsible for 40% of all new homes built. The CPA states that the extra £10 billion announced for the programme earlier this month will continue to keep housebuilding active despite the general housing market slowdown.

It will be difficult for the majority of construction firms to escape the impact that rising inflation, reduced economic growth, and declining wages will have on the industry over the next two years. Commercial building is expected to bear the brunt of all this in the construction sector.

Noble Francis, the Construction Products Association Economics Director, said that the decline in commercial construction may be offset by growth in infrastructure and housebuilding. However, due to the general housing market slowdown, especially in London, housebuilding is expected to increase by 2.2% both next year and in 2019.

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These Construction Products Association forecasts come at a time when any private housing growth will depend on governmental delivery of infrastructure projects. This will probably have a significant impact on construction output, which could potentially result in an industry-wide decline of over 1% next year.

Mr Francis said that construction activity is presently at high levels, especially in cities such as Birmingham and Manchester. The forecasts that spotlight the reduced amount of new orders since the latter half of 2016 is now beginning to affect activity on the ground as projects arranged prior to the referendum come to an end and are not being replaced. This is especially true in areas such as the construction of new commercial offices in the capital, where demand from office space from the financial sector has declined.

Mr Noble said that infrastructure is expected to drive construction activity in the coming years with work on key projects but the sector has been hit with constant delays and cost overruns. Given that construction activity is expected to be flat in 2018, if the government cannot deliver infrastructure plans more effectively, construction output is likely to be lower in 2018.

The forecast arrives in the midst of rumours that the Prime Minister has called the largest housebuilders in the country to a recent emergency summit. Government sources claim that Theresa May will challenge the industry to build more homes.

In the meantime, Chancellor Phillip Hammond is experiencing increasing pressure to eliminate the ‘safety first’ approach to this year’s Budget at the end of November.

The Chancellor is expected to make large promises on private housing growth in an attempt to attract young voters.

New measures could include releasing land from the Green Belt, permitting local councils to borrow more funds to build new homes, and pouring more money into Help to Buy.

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