With private new housing and repair, maintenance and improvement (rm&i) to see double-digit falls this year, there will be a sharp 7.0% decline in construction output in 2023, according to the CPA’s Summer Forecast.
Amidst a flatlining UK economy, falling real wages, and mortgage rates now expected to continue rising over the next six months, households are likely to endure a difficult year, and the demand for both new housing and improvements works will be hit hard.
Private housing output is expected to fall by 19.0% before a recovery starting in the second half of next year, which will see a rise of 2.0% in 2024 overall. Starts are forecast to fall by 25.0% in 2023 as house builders in the sector are likely to continue focusing on completions to meet the lower levels of demand rather than starting any new developments.
Private housing rm&i is forecast to fall by 11.0% this year, before growth of 2.0% next year in line with a recovery in household finances. Since March 2022, following the end of the pandemic, ‘race for space’ and record level of activity, rm&i has been falling due to persistent inflation, rising interest and mortgage rates, and falling real wages.
Infrastructure is expected to fall by 0.5% in 2023, before growth of 1.0% in 2024. While the sector remains strong due to major projects such as HS2, the Thames Tideway Tunnel and Hinkley Point C, there remain serious questions around the sector in the near-term given skills and product availability, as well as financial issues at companies such as Thames Water.
- Construction output falls by 7.0% in 2023 before growth of 0.7% in 2024
- Private housing output falls by 19.0% in 2023 and rises by 2.0% in 2024
- Private housing repair, maintenance and improvement to fall by 11.0% in 2023 before growth of 2.0% in 2024
- Infrastructure output to fall by 0.5% in 2023 and rise by 1.0% in 2024
- Industrial output to rise by 0.3% in 2023 before falling by 9.0% in 2024
In the context of the CPA Forecasts, as the government restates its ambition to deliver one million houses during this term, David Hopkins, our chief executive calls for real commitment to combat a housing recession:
“Amidst sky high interest rates and plummeting demand – much of it the result of the government’s own disastrous mini-budget last year – we need to see more than hollow words, or tweaks around the edge of planning policy – but real financial commitment. While we can welcome the ambition of the Prime Minister’s announcement today, which seeks to prioritise building in inner-city areas, we need to see greater detail on how the government will deliver on their promises.
“Levelling up, transitioning to net zero, or delivering high quality, low-carbon housing will not happen without investment from the government. Creating our 2050 transition starts now, and this includes helping build up a strong network of incentives along with a bottom floor for housing activity. By taking on some of the risk of the construction sector, and placing focus on procuring affordable, low-carbon housing, the government can support greater private investment into the sector.”