14 June 2023
In April 2023, the volume of monthly construction output decreased slightly by 0.6%, following two months of consecutive growth. The decrease came from a fall in new work (1%), offset slightly by an increase in repair and maintenance work (0.1%).
In addition to the monthly decrease, new work saw a 0.9% decrease in the three months to April, however, construction output saw an overall increase of 1.6% in the three months, due to repair and maintenance work rising by 5.7%, indicative that housebuilding is on a continued slowdown.
Commenting on the construction output data Kelly Boorman, partner and national head of construction at RSM UK, said: ‘The latest fall in construction output reflects the slowdown in the private housing market as concerns remain around the number of mortgage products in the marketplace and their suitability amidst the cost of living crisis. This highlights cautiousness in the market for homeowners – who are choosing to stay put and invest in their existing properties, as seen in the uptick in private housing repair work in the three months to April. With interest rates likely to increase further and mortgage rates set to jump even higher, demand for housebuilders will weaken in the coming months.
‘In addition, housebuilders haven’t delivered on the targeted volumes set by the government for new housing, and as they pull back on projects to protect their margins, this is concerning for future supply. Although house prices will start to fall due to lack of demand, the chronic shortage in new homes will mean prices will only drop slightly, which won’t be enough to remove the imbalance driven by soaring mortgage prices and inflation. While we expect economic conditions to improve towards the end of the year, businesses will still be approaching 2024 with cautious optimism.