UK’s Cooling Property Market Affecting Construction Industry

Nov 17, 2014

Last month, house building fell to its lowest level in 12 months, according to an article on The Telegraph. Is this due to the recent reports of a cooling in the UK property market?

Although demand remains strong, the article cites a study by Markit which closely-surveyed businesses delaying new contracts, possibly as a result of a dent in confidence. The slowdown of the housing market has resulted in “greater caution among clients and delays to the launch of new development projects”, Markit claimed.

The Markit/CIPS construction PMI fell to 61.4 in October, from 64.2 in September. Although this was well above the benchmark of 50 (that divides growth from contraction), it was below predictions for a decline to 63.5, and was the weakest reading since May.

Tim Moore, an economist at Markit, has said that this recent survey suggests that the “chill winds” blowing across the UK property market have begun to have an impact on the booming residential building sector. While house building activity continued to rise at a strong pace overall, the summer slowdown reflects increased caution with regards to new developmental projects – especially amidst stricter mortgage lending rules and concerns about the demand outlook.

However, official figures have shown that the construction industry expanded by 0.8% in the third quarter against the previous quarter, despite contracting by 3.9% in August.

If there is a demand for new houses, however, do you think there is any need for developers to be cautious?