How the housing construction industry will develop

Housing construction remains an area of high demand in the UK. Despite a year in which house prices have felt the impact of the pandemic – like many other sectors of the economy – construction activity has been fairly consistent. Now, looking ahead at how the housing construction industry is going to develop in the coming months there are a number of key developments to focus on.

Activity in March signalled more positive times to come

Most organisations have stepped fairly tentatively into 2021 but by March there were signs that a more positive outlook for the year could be realistic. Two key reasons in particular could make this a glass half full moment:

  1. Construction growth. Uncertainty has been an ongoing theme during the past 12 months and, although construction hasn’t suffered in the same way as many other sectors of the economy, it has not been an easy time. In March this year we saw some real, genuine signs of a recovery that could signal more positive times to come, for housing construction as well as the wider economy. Figures from IHS Markit purchasing managers index for March – compiled by CIPS – revealed that construction growth hit a seven year high. House building activity in the UK increased up to a score of 64 in March, up from just over 59 in February and significantly higher than the January score of just 49.2 (anything over 50 is an indicator of growth). These figures also indicated that across all areas of construction it was house building that was faring best and that this was one of the key areas driving the March construction boom. Figures from the Office for National Statistics supported the strength of growth in the housing construction industry – a slight rise in new private housing construction noted in March was attributed to some recovery in the property market as more buyers looked to purchase.
  2. House prices. March was also the month in which house prices in the UK hit a record high, up just over 1% compared to February. Although this may seem like a small rise it’s the first upward movement in house prices since November 2020 so is a positive sign. Given that the start of 2021 was incredibly subdued in terms of activity in the housing market there is a lot to get excited about if this small spike in house prices is anything to go by. The average property in the UK is now worth £254,606, which sets a new record for average house prices and much more positive growth is being forecast for the rest of the year, albeit with some caution. There are many reasons for the increase in house prices seen in March this year, including the suspension of stamp duty for properties worth up to £500,000 – and the extension of this tax break until 30th June – as well as the new mortgage guarantee scheme that has been put in place by the government. Consumer confidence is another key factor, something that is returning thanks to the success of the vaccine programme and the potential for lockdowns to lift.

Build-to-rent is leading the way in housing construction

It’s impossible to look at the way that the housing construction industry is going to develop without including the burgeoning build-to-rent sector. In tough economic times build-to-rent is still achieving strong growth and progress and, as a result could be a big factor in driving economic recovery over the UK as a whole. £1.8 billion of capital was deployed in the third quarter of 2020, which represents the highest ever quarterly total for build-to-rent. This is an emerging area of the housing construction market that is responding directly to need – build-to-rent caters specifically to the increasingly large rental market in the UK, not only creating housing options but evolving the way we can live and work too.

Build-to-rent is moving away from out of date models of renting in the UK where properties are often converted, landlords amateurs and tenants overcharged. Instead, build-to-rent properties are constructed for tenants with a focus on service, site management and amenities such as fitness centres, chill out zones and work spaces built in. Currently, there are around 100,000 build-to-rent developments under way in the UK with more planned as investment continues to pour into this area of construction. So this is good news for the construction sector but how could build-to-rent benefit the economy as a whole?

  • Supporting mobility as the UK recovers. Build-to-rent properties take away the hassle from the moving process so individuals can follow the work. Employers benefit too, as it’s easier to move staff around the country.
  • Better building design saves tenants money, which can contribute to regeneration of struggling areas and a boost in consumer spending and confidence.
  • Local area benefits. Every build-to-rent development brings benefits to the local community, whether that is job creation or the improvement of local infrastructure.
  • Home working ready design. Build-to-rent properties are much more flexible and make it simpler to accommodate home working, whether that is via better connectivity or home working hubs integrated into the building design.

The housing construction industry is one of the strongest areas of construction as we go further into the second quarter of 2021. Figures released in March reveal that it’s not just developer and investor confidence that is returning but consumer confidence too. This indicates that the industry is going to continue to grow this year, no doubt with build-to-rent driving many projects within the sector and even setting a new pace of change.


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