Private housing leads construction output in October

The monthly estimate of construction output fell by 0.6% in October 2016, following a rise of 0.9% in September 2016. Recent weakness in construction figures means that October’s output is some way below the average level seen across the first half of 2016, but remains above the average level of 2015.

The largest positive contribution this month came from new private housing (plus 0.4 percentage points on the month) while the largest negative contribution came from infrastructure (minus 0.5 percentage points).

“The latest ONS figures demonstrate the continuing importance of new private housing on overall levels of activity within the UK construction industry,” said Phil Harris, head of sales at BLP Insurance. “It also highlights the need for those measures announced by the Chancellor in last month’s Autumn Statement on infrastructure to be realised. In particular, accelerating policies dedicated to unlocking under-utilised development land for housing, to encourage increased activity on the ground.

“There is no indication of an early end to the volatility within the UK construction industry. The post-EU referendum environment continues to remain uncertain, compounded by the already established pressures around cost of materials and shortage of skilled labour.”

Private new housing is the main contributor for the overall trend in total housing, accounting for approximately 87% of all new housing (based on October 2016 data).

Private new housing reported an increase of 2.4% in October 2016 compared with September 2016, while public new housing fell by 3.0%. Due to the small weight of public new housing, the decrease did not have a large impact on the overall growth of new housing, which increased by 1.7%.

On the year, there were increases in both public and private new housing of 4.4% and 13.9% respectively compared with October 2015. This was the 43rd consecutive period of year-on-year increases in private new housing.

The volume of new orders in new housing increased slightly between Quarter 2 2016 and Quarter 3 2016 by 0.1% while there was an increase of 21.7% compared with the same quarter last year. The level of new housing is at its highest since Quarter 4 (Oct to Dec) 2013.

Private new housing increased by 0.2% compared with Quarter 2 2016 to a level of £3.5 billion; this is the highest level since Quarter 3 2007. Compared with the same period a year ago private new housing increased by 17.8%.

Construction of new housing output rose in October 2016 (by 1.7% compared with September 2016), while HM Revenue and Customs UK Property Transactions Statistics reported a rise of 1.0% in the number of residential property transactions between September 2016 and October 2016, suggesting a rise in housing demand.

In addition, the ONS House Price Index for September 2016 reported a 7.7% increase in house prices in the year from September 2015, continuing the strong growth seen since the end of 2013. The average house price was unchanged from the previous month. More recently, Nationwide and Halifax house price data reported annual house price growth in the year to October 2016 of 4.6% and 5.2% respectively, an easing of house price growth compared with recent months.

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