Social housing building drops 40% as Budget cuts bite

Published:  12 July, 2010

UK: The value of social housing construction projects starting on-site in the second quarter was 40% lower than a year ago, according to the latest Glenigan Index.

The upward trend earlier this year in private housing has also petered out with the value of start on-sites down 2% on a year ago as housebuilders and consumers reappraise market conditions post-election.

"While social housing starts are likely to remain under pressure over the coming months, a renewed recovery in private housing starts is anticipated at the end of the year as housebuilders capitalise on gradually improving market conditions," according to Allan Wilen, economics director of Glenigan.

"Private housing had previously been a source of optimism as returning private sector confidence encouraged developers to invest in new work.

"However, this quarter's dip in project starts highlights the fragility of the recovery.

"Poor household earnings growth and rising unemployment, combined with limited mortgage availability are expected to restrict the pace of recovery in new house sales and project starts during the remainder of 2010," Mr Wilen added.

Retail project starts were down 23% in the three months to July, compared to a year ago.

This is expected to be a temporary blip in what has generally been a growth sector this year.

The flow of office and industrial projects remains weak. Additionally, community and amenity, health and education have suffered amid election uncertainty and as departments reviewed their spending programmes.

Despite restrictive fiscal policy over the next few years, a more widespread strengthening in private sector activity is anticipated over the two-year forecast period. This will be supported by renewed private sector confidence and investment, the report's findings reveal.

"Regionally, only the East Midlands, Wales and the North East saw significant rises in the value of new work compared to a year ago," Mr Wilen explained.

"The flow of new work dropped by a quarter or more in London, Northern Ireland, the East and South East," said Mr Wilen.

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