Housing starts to fall to 1924 levels

Private housing starts are set to drop a further 32% this year, taking numbers down to 70,000 – their 1924 level, according to the Construction Products Association.

Their latest forecasts, published today, report that construction industry output is set to fall by 9% in 2009, its biggest decline in nearly 30 years. Output is likely to fall by a further 4% in 2010 – a greater fall than at any time since the early 1980s.

Private housing rmi work will suffer since it is so closely related to property transaction levels and is dependent upon household disposable income levels – likely to fall in 2009. Output in this sector is forecast to fall 15% this year and a further 5% in 2010.

On the bright side, the Carbon Emmissions Reduction Target could bring RMI benefits since it provides support for householders wanting to improve the energy efficiency of their houses and could be worth £2.8bn over three years. However, since it’s inception in April 2008, little benefit has been seen by the industry.

Public housing is likely to rise 6.7% in 2009 and by 9.4% in 2010 on the back of promised government spending to boost the housing sector, however expected cuts in spending after that will ensure that the government falls well short of its 45,000 new social homes target by 2011.

Looking further ahead, the pent-up demand in the housing sector means that there will be a recovery in private housing starts, which are forecast to be 17.9% up in 2011 and 8.5% in 2012.

However, recovery is only likely if credit becomes more easily available and the economy begins to recover.

CPA chief executive Michael Ankers said: “The speed of decline is having a dramatic effect on many parts of the construction industry and is being driven by an unprecedented reduction in private sector investment resulting from the credit crunch and economic downturn. Private commercial work has collapsed as the retail sector cuts back on its investment plans in the face of falling sales. Orders for new offices have fallen 47% and as a result we are forecasting that construction output on office projects will fall by 50% over the next two years.

“The only sectors where construction output is forecast to increase are linked to public spending. The Building Schools for the Future programme has finally got off the ground and spending on education projects is expected to grow by 28% over the next two years. Construction activity in the health sector will remain strong and we are also forecasting an increase in construction output on infrastructure projects throughout the forecast period with the Crossrail project playing an increasingly important part towards the end of our forecast period.

“The key message from these forecasts is that the construction industry is heavily reliant on public sector spending to sustain even these reduced levels of activity. Without the anticipated increase in public sector programmes, the industry would be faced with a 15% fall in output over the next two years – the kind of reversal that the industry has not experienced in more than 60 years.”

Further details on the Forecasts are available on www.constructionproducts.org.uk