Construction Output Forecast to Grow by 30% Over the Next 5 Years

Total construction output in Great Britain will increase by 30% between 2013 and 2018 according to new forecasts published in the latest edition of the quarterly Construction and Housing Forecast Bulletin, issued by AMA Research. Construction output is forecast to grow by around 6% in 2014 to around £129bn, underpinned by strong growth in the residential sector, with more moderate increases expected in the non-residential sector.

Throughout 2013 there has been evidence of genuine recovery within both construction sub-sectors, with overall growth particularly strong during Q2 and Q3. While the non-residential sector experienced marginal decline in Q3-Q4, the residential sector saw growth of 4%.

The outlook for the residential sector in the medium term remains positive with healthy rates of annual growth currently forecast until 2018. Residential new work output is forecast to increase by 36% between 2013 and 2015, stimulated by the recent extension of buying assistance schemes such as Help to Buy within the private sector and schemes to encourage investment in the rental sector such as Build to Rent. Housing starts and completions are forecast to show strong growth in the short term as consumer confidence and mortgage lending rates improve, with completions currently forecast to reach 200,000 by 2017.

Forecasts for the non-residential construction sector are also positive, with output expected to see annual growth rates of 4-5% in the medium term to reach a value of around £65bn in 2018. Infrastructure output growth should continue to be underpinned by large scale transport and electricity projects in the medium term, while output within the office and retail sectors are forecast to see more moderate growth rates. Output within the industrial sector is expected to remain volatile.  
    

“Finally there are some genuine indications of recovery within the construction market. The residential sector in particular is experiencing strong growth at the moment, driven by increased mortgage lending rates and an upward trend in new house prices.” said Andrew Hartley, Director of AMA Research.

AMA Research estimates that construction output will increase at a rate of 5-6% per annum in the medium term, with output expected to represent a value of £158bn by 2018.

The ‘Construction and Housing Forecast Bulletin – GB 2014-2018 Analysis’ is issued four times per year by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. Issue 26 (Q2 2014) is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.

Self Build Housing volumes forecast to rise over the next 5 years

In a new report published by AMA Research, self-build volumes have been forecast to rise over the next few years in response to measures recently announced by the government. How significant the increase will be is dependent on a number of factors, and the report offers three different scenarios for market growth.  

House prices and housebuilding supply are undoubtedly at - or very near - the top of the political agenda in mid-2014. House prices continue to rise by an average of around 10% across the country, though this is skewed by reported rises of around 17% in London.

Self Build and New Housing Completions UK 2010-2015

There is much political and media debate that the Government’s Help to Buy scheme is fuelling this rise, though this is generally overstated as the majority of the scheme’s funding has actually been focused on the North and Midlands where average rises are currently much lower.

At the same time, the UK has experienced a major decline in housebuilding – collapsing in 2008 and then experiencing only slow recovery since, with completion levels relatively flat in 2013 - though the volume of starts is steadily increasing. Within this scenario, the self build market has also experienced some decline since the peak of 2007, but not to the same extent as the overall market.

There are various estimates of the market for ‘self build’ in the UK, but AMA estimate the figure at around 10-11,000 dwellings in 2013, which typically accounts for around 7-8% of total housebuilding output – or around 10% of private sector output. This figure is way below the average for most ‘advanced’ countries and reflects the serious constraints on output which are well documented- and include the availability of finance, together with difficulties in obtaining suitable land and planning permission.

In general terms – and allowing for the variations within the economic/housing cycle - the underlying trend in self build output has been relatively flat, with no sign of any real significant underlying growth. However, there is no doubt that demand for self build is much higher than supply and the sector offers a great opportunity to help meet the targets to increase overall supply if the constraints were lifted.

While, volumes have seen a slight fall in volume terms in recent years, the self build market has continued to grow in value terms, reflecting increases in key component cost elements and is now estimated to be worth over £3bn. Self build tends to be a key market for higher value and often more innovative products, particularly in terms of higher standards of insulation, use of timber frame, adoption of renewable technologies and often high quality fittings, such as kitchens and bathrooms.

Commenting on the future prospects of the sector, Andrew Hartley, Director of AMA Research, said: “Over the last year, the Government has announced a series of measures to improve land availability, planning processes and financial support for the self build sector, in a bid to double the size of the market by the end of the decade. Increasing output to around 20,000 dwellings per annum may seem a realistic target, but this depends on overcoming well-entrenched problems for the sector, which will require significant commitment and action on behalf of central and local government.”

Given this background, it is unclear how the self build market will emerge both under the current government and indeed, under a new government post-2015. There is clearly an unmet demand for self build and the current crisis in the housing market would suggest that significant volume growth in the general housing market could be met by the self build sector, should all the necessary requirements be in place.

The ‘Self Build Housing Market - 2014-2018 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.