The housing market is stalling as the wider economy braces itself for soaring energy prices, inflation for raw materials, higher borrowing costs and supply chain disruption says RSM UK. Optimism is at the lowest level since August 2020 with residential work remaining the worst-performing area.
According to the latest PMI data by IHS Markit and CIPS, May PMI business activity fell to 56.4, down from 58.2 in April, the weakest rate of output growth for four months.
Kelly Boorman, partner and national head of construction at RSM UK, said: ‘Despite the 1% growth in May, looking ahead the housing market is stalling, while demand for affordable and first-time buyer housing remains strong, housing prices are likely to stabilise in coming months as the cost of living impacts homeowners. The market is now performing at the lowest output rate since the pandemic, so whilst we see no evidence of a crash on the horizon, a marked correction is underway. In the coming months, we can also expect to see a slow-down in buy to let investments. On the upside, this will provide more favourable conditions for first-time buyers while lenders continue to make available 95% mortgages.
‘The uptick in commercial activity for May was surprising, however this will likely follow residential activity and slow down as sector-wide uncertainty remains around soaring energy and material costs and fixed-rate contracts. These conditions, exacerbated by labour shortages and supply chain disruption, will increase pressures on contractors and further tighten margins. Looking to the future, the industry is heading for a major slowdown in output activity with optimism likely to fall further as concern of a recession takes hold.'