Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

January 5, 2024

Economics – House price rise beats expectations, Halifax; Improving construction outlook for 2024, purchasing managers | Fortnight ahead

Economic data

House prices. Average UK prices rose for the third consecutive month in December by 1.1%, from +1.2% and +0.6% in October and December, according to the Halifax. Prices for the year ended up 1.7% at £287k, according to the UK’s largest mortgage lender, the first positive Y/Y reading since the market started cooling again in April, following a brief post-mini-budget recovery in the early spring. Both the seasonally-adjusted M/M and the Y/Y rates beat consensus among economists of +0.1% and -0.4% respectively. Halifax itself la year ago forecast that prices would fall by about 8% in 2023. The lender admitted: “The housing market beat expectations in 2023. The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months”. Geographically, Northern Ireland grew most, +4.1% Y/Y; Scotland, +2.6%; the North West was the strongest English region, +0.3% and the South East the weakest, -4.5%; London, -2.3%. Looking ahead, its latest forecast “suggests prices could fall between -2% and -4% during the coming year, although, as with recent years, forecast uncertainty remains high given the current economic climate”. Next release, 7 February.

Halifax House Price Index

Construction activity. The rate of decline in overall UK construction eased in December, seen particularly in housebuilding in the latest sector purchasing managers’ data from S&P Global. The headline PMI Index rose to 46.8 on a seasonally adjusted basis from 45.5 in November and the highest for four months. At below the neutral 50 level, this indicates a continuing reduction in activity, but at a falling rate of decline. Housebuilding remained the weakest category, at 41.1, but was the highest reading since July. Civil engineering activity, 47.0, also posted a softer pace of contraction at the end of last year. Commercial construction meanwhile declined more modestly, at 47.6, at its fastest since January 2021; some firms noted that concerns about the domestic economic outlook, alongside elevated borrowing costs, had led to greater caution among clients. The softening in the speed of overall decline actually contributed to a marginal but positive change in construction employment in December. There were also shorter waiting times for materials and price discounting. Looking ahead, a net 24% of the companies surveyed forecast an increase in construction activity levels in 2024 (41% expecting increase; 17%, decline).

S&P Global PMI

Fortnight ahead

Trading updates next week from three of the UK’s top five housebuilder will be noteworthy, not so much as to financial performance in their latest fiscal periods, but indications of site visitor numbers and reservation rates in the post-Christmas period, which can be unerringly good guides to the spring selling season.

Construction and Property company and economic news

Prices are as at the previous day’s close. Where quoted, net debt is pre-IFRS16 (excluding leases) unless otherwise stated.

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