Residential building leads construction recovery

July 21, 2017 / Isla MacFarlane
Residential building leads construction recovery

After a torrid month in May for construction, figures began to move in the right direction across June, with contract awards increasing by 12%, as a number of high profile projects were given the green light.

Across the various construction sectors, it was residential building that produced the highest value on the month, reaching £2.5 billion, bouncing back admirably after a dip in May when it decreased to £1.7 billion. Furthermore, four of the top ten biggest projects in June came from the residential sector.

The latest edition of the Economic & Construction Market Review from industry analysts Barbour ABI, highlights the levels of construction contract values awarded in June across all regions of Great Britain, which totalled £5.5 billion based on a three-month rolling average, an increase on the £4.9 billion from May.

Activity in the residential sector increased significantly in June with the total value of projects valued at £2.5 billion based on a three month rolling average. This is a 43.9% increase compared to April and is 39% higher than June 2016.

The number of units associated with residential contracts awarded decreased by 3.9% between May and June based on a three month rolling average, and are 9.2% lower than June 2016. Taken together this data shows the continued popularity of residential developments in the UK, with a refocus on London in June.

The latest house price indices for June from Halifax showed that average house prices are rising at 2.6% annually, down from 3.3% in May. However, there was a third consecutive quarterly decline in house prices indicating an underlying softening in the housing market.

In contrast, the Nationwide reported annual house price rises at 3.1% in June, up from 2.1% in May. In further evidence of lessening housing market activity the Royal Institute of Chartered Surveyors reported that house sales fell in June for the fourth month running.

London was the main location for residential development in June accounting for 35.1% of the value awarded, largely due to the £800 million North Quay development in Poplar. The remainder of activity in the housing market was fairly evenly spread with one notable project the Jacksons Row development in Deansgate, Manchester.

The type of projects awarded in the residential sector was dominated by private housing this month. Private housing accounted for 86% of the value of contracts awarded this month, an increase from the 79% in the corresponding month last year. After private housing, the next largest project type were hostels/halls of residence projects which accounted for 6% of the value awarded, unchanged from the corresponding month last year

Michael Dall, Lead Economist at Barbour ABI, said, “The construction sector bounced back after an election-focused month in May, as the residential sector once again performed strongly, continuing the trend of it holding the construction sector steady. However, with declines in value from Hotel, Leisure & Sport and in particular Infrastructure, there is continuous pressure on Residential to achieve high values every month.”

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