Gloomy outlook for housing market
A SHARP slowdown in housebuilding is sapping growth in the construction sector, prompting further concerns among North East builders about the strength of the market.
The Chartered Institute of Purchasing and Supply’s (CIPS) latest activity index, where a score over 50 signals growth, fell to 52.1 in August from 54.1 in July – representing the third monthly fall in a row.
Housebuilding saw much weaker growth than commercial construction and civil engineering, fuelling fears that the sector’s strong rebound since the recession is losing steam, with jobs also falling for the second successive month as a result.
The survey showed that civil engineering – where public sector spending is typically focused – registered the strongest growth, although this is expected to be hit by a deficit crackdown.
The situation is made worse by the news that house prices are also buckling under the strain of the economic downturn, with property prices falling by 0.9% during August, according to figures from Nationwide.
The annual rate of change also weakened for the fourth consecutive month to stand at 3.9%, the lowest year-on-year rise since November last year. The gloomy figures come just days after economists warned that the housing market could be heading for a double dip.
Figures from the Bank of England released earlier this week showed that only 48,722 mortgages were approved for house purchase during July, a level that economists consider to be consistent with house price falls.
Barclays Capital chief economist Simon Hayes said the disappointing figures would heighten worries “the housing market is entering a period of stagnation, if not outright contraction”.
John Dickson, executive chairman of demolition and construction firm Owen Pugh, near Cramlington, Northumberland, said: “Although Owen Pugh doesn’t deal directly with housebuilding, it’s clear that the market affects the construction industry as a whole. Those housebuilders that are at a standstill are now looking at other areas, which of course puts pressure on companies like ours.
“We have reduced our prices which is helping us to break even, but reducing them any lower to mitigate increased competition will make it difficult for us to sustain our position in the market.”
