A recent survey indicates that the UK construction sector remains in “rude health,” despite slower activity growth in October 2015. Sahel Majali discusses how the UK’s thriving property market is providing developers with new construction opportunities across the country.
Thriving property market
Data from the Office For National Statistics indicates that average UK house prices grew by 6.1% year-on-year to September 2015; up from 5.5% in the year to August 2015. However the UK, according to a recent study from Nationwide, doesn’t have enough residential property; supply has now slipped to a low not seen since the 1970s.
This high demand low supply ratio also characterises the UK’s commercial property market. The chief economist at the Royal Institute of Chartered Surveyors (RICS), Simon Rubinson, recently commented: “We’re seeing a solid increase in demand for commercial properties across retail, office and industrial sectors. In other words, at the moment, however badly rental costs might pinch, they do not appear a barrier to growth.”
UK Construction growth
This strong demand for property, coupled with weak supply volumes, has powered the growth of the UK construction industry. The Telegraph reported that the Markit/CIPS Construction Purchasing Managers Index (PMI) slipped from 59.9 points in September 2015 to 58.8 in October.
However any reading above 50 points indicates growth; therefore the UK construction sector continued to expand in October 2015. Tim Moore, senior economist at Markit, explained that a bounce in new orders and the fastest pace of job creation for nearly a year “highlighted another upturn in overall UK construction output.”
“Upbeat” growth prospects
Meanwhile Markit added that UK construction firms were “highly upbeat” about their growth prospects over the coming year. Over 50% of companies surveyed expect activity to rise, while only 7% believe it will fall. Construction firms may believe that they’ll keep growing because they provide vital services that support UK property sector activity, which experts predict will expand to new heights next year.
Research from international real estate firm Knight Frank predicted that average UK house prices will increase 4.1% in 2016. Furthermore a market survey from RICS predicted that UK commercial rental values will rise 4% over the same period of time. If developers decide to initiate new construction projects in 2016, they stand a good chance of earning a significant return on their investment.
Mid Contracting UK
Mid Contracting UK has extensive experience across the UK construction industry. We have delivered a wide range of projects, including the Aynhoe Park Estate residential development in Aynho, Oxfordshire. We have the market expertise, skilled professionals and industry connections developers require to capitalise on the UK’s robust property market as we head into 2016.