New Build & Home Improvement About To Take A Tumble
Construction output growth is forecast in the latest CPA construction forecasts – but it comes from warehouses and infrastructure, while there will...
Read Full ArticleThe Construction Products Association’s Winter Forecast says UK construction output is set for a gradual recovery this year and next.
This comes after two challenging years that have particularly affected the two largest sectors of private housing new build and repair, maintenance & improvement (RM&I).
Total construction output is expected to grow by 2.1% in 2025 and 4.0% in 2026. The recovery for this year is a downward revision compared with 2.5% growth which was anticipated in the CPA autumn forecast. It has been revised down because of the prospect of slower economic growth, higher inflation for longer and fewer interest rate cuts than previously expected.
In private housing, an uptick in mortgage interest rates at the end of 2024 suggests that the housing market recovery and demand for new-build housing will be slower and more uneven in the first half of 2025. Much will depend on how quickly mortgage rates start to fall again and the impact this has on the house builders’ key spring selling season.
House builders continue to cite an array of issues that are adding costs or delays such as water and nutrient neutrality, biodiversity net gain, revised building regulations, the rise in payroll taxes and submissions to the Building Safety Regulator for those involved in high-rise residential construction. Overall, private housing output is forecast to rise by 6.0% in 2025 and 8.0% in 2026.
Private housing RM&I is the second-largest construction sector. With households now experiencing sustained real wage growth and slight falls in interest rates, an expected rise in home moves should drive home improvement projects, although this is most likely to occur in the second half of 2025.
Continued house price growth, combined with households potentially feeling more comfortable using their savings on home improvement, should also help lead to private housing RM&I gradually increasing in the second half of 2025 and into 2026. In addition, homeowner spending on energy-efficiency retrofit work remains strong.
Commenting on the Winter Forecasts, CPA head of construction research, Rebecca Larkin said: “After a difficult couple of years, it is a welcome return to growth forecast for the construction industry in 2025 and 2026, although the recovery is set to be more gradual than in our forecasts before the autumn budget. With stubborn inflation meaning interest rates are unlikely to be lowered as much as previously expected, it adds fresh uncertainty to the point at which potential home buyers and existing homeowners will feel comfortable and confident enough to proceed with their largest spending decisions and get a sustained recovery in new house building and RM&I underway.”
Picture: The Construction Products Association’s Winter Forecast can be obtained form the organistion’s website.
www.constructionproducts.org.uk
Article written by Cathryn Ellis
29th January 2025