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Housing starts to fall 38% this year

The Construction Products Association are expecting to see private housing starts fall 38% this year, dropping a further 14% in 2009.

Housing starts to fall 38% this year

This means private housing starts in 2009, at 95,000, will be at their lowest levels since the Second World War. No recovery is expected in private housing until 2010 when the credit situation has improved, the CPA report in their latest set of Construction Industry Forecasts.

Construction output is expected to decline by seven per cent during the next three years, before a return to growth in 2011 at the earliest. Yet, despite this recovery, housing starts in 2012 will remain below their 2007 levels.

The economic slowdown and volatility in the financial markets has already had a significant impact on the private housing market, which during both this year and next will see the fewest number of housing starts for 60 years. However, this turmoil is now undermining other parts of the industry; this year has experienced a dramatic fall in the construction of industrial buildings and the future prospects for commercial development is also looking exceedingly poor. Private housing output last year was £11,279m, this year is likely to be £8,121m, with next year £6,984m. The Association are expecting output for 2010 to be £7,822m, a rise of 12.0%.

In the short term, private housing rm&i has held up well, despite the impact of the credit crunch, though it has been helped by the resurgence of money for energy efficiency schemes. Looking further forward, however, the Association expect this sector to weaken along with the rest of the economy.

Private Housing RM&I output last year was £11,848m,, likely to fall 6% this year to £11,137m, remain at the same level in 2010 before rising by 2% to £11,360m in 2011.

RM& I output on the public housing sector is forecast to fall 3% to £6,068m in 2008, then a further 1% to £6,007m in 2009 and 2~% to £5,887m in 2010.

Michael Ankers, chief executive of the Construction Products Association said: “These Forecasts are without doubt the gloomiest we have produced since compiling this information and have been downgraded from just three months ago to show the sharpest downturn since 1991. The prospects for the industry over the next few years are very precarious therefore it is critically important the government maintains its spending plans in order to deliver the much needed investment in our schools, hospitals, infrastructure and other public sector investment. With shrinkage already being experienced in privately funded new work the industry is certainly in for a bumpy ride as output falls to levels last seen in 2002. Turnaround is now expected in 2011 at the earliest although the housing starts per year will continue at an historic low until 2012.”

In public new housing, output and new orders both fell during the first half of 2008, pointing towards a fall of 7% in output for the year as a whole. Looking forward, funding is in place for new social homes and, in addition, public housing expenditure of £400m has been brought forward to deliver 5,500 new social homes and output in the sector is expected to recover in the coming years. Despite this, the forecasts suggest that it is increasingly unlikely that the government’s targets will be met, with starts in 2012 anticipated to reach only 34,000.

The commercial sector enjoyed a fourth successive year of growth in 2007 with a 13% rise in output on a year earlier. In the first year of the economic slowdown, the commercial sector appeared largely immune to the effects buoyed by high levels of new orders in 2006 and 2007. However, the economic downturn is now expected to dictate the sector’s future for the remainder of the decade.

After three years of contracting output, public nonhousing is expected to enjoy considerable growth over the next three years buoyed by growth within education and health sub-sectors, in addition to ODA work on the Olympics. Output in the health sub-sector is also expected to increase due to the provision of new hospitals and GP clinics. In terms of the Olympics, work has started already on the Olympic stadium, the Aquatics centre and the Olympic Village with work on the remaining buildings in the pipeline.

Output in infrastructure has fallen steadily over recent years and in 2006 fell to a level not seen since 1989. Prospects for the next few years are, however, much brighter with significant work coming through on both road and rail programmes, as well as within the water and sewerage sector. Although the recovery in the roads programme is expected to be relatively short lived, longer term prospects are good in other areas with major expenditure on Crossrail likely to come through towards the end of the forecast period.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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