- Surveys point to steady growth
- Buyer confidence improving
- Construction sector expanding
In a further sign of returning confidence in the housing market, the latest survey from the Halifax – part of Lloyds Banking Group (LLOY) – shows annual prices continuing to rise despite relatively subdued activity.
The news wasn’t quite enough to support the shares of the leading developers such as Barratt Developments (BDEV), Persimmon (PSN) and Taylor Wimpey (TW.) given the weak market backdrop, with each stock giving up between 1% and 2% in mid-morning trade.
AFFORDABILITY REMAINS KEY
According to the latest Halifax survey, average UK house prices rose 0.3% in March compared with the same month last year ‘reflecting the opposing forces of an easing cost of living squeeze – now that pay growth is outpacing general inflation – and relatively high interest rates’ said mortgage director Kim Kinnaird.
‘Underlying demand is positive, as greater numbers of people buy homes, demonstrated by recent rises in mortgage approvals across the industry and underpinned by a strong labour market. And with rental costs rising at record rates, home ownership continues to be an attractive option for those who can make the sums work’, added Kinnaird.
Today’s survey backs up the trend shown in the Nationwide survey earlier this week which showed average prices rising at 1.6% on an annual basis in March.
‘With cost-of-living pressures easing as inflation moves back towards target, consumer sentiment is improving. Indeed, surveyors report a pickup in new buyer enquiries and new instructions to sell in recent months. Moreover, with income growth continuing to outpace house price growth by a healthy margin, housing affordability is improving, albeit gradually’, said Nationwide chief economist Robert Gardner.
Gardner added: ‘If these trends are maintained, activity is likely to gain momentum, though the pace of the recovery is still likely to be heavily influenced by the trajectory of interest rates.’
CONSTRUCTION ON A FIRMER FOOTING
The broader UK construction sector also received a fillip with the release of the latest S&P Global Construction PMI survey which showed a renewed increase in activity across the industry in March, ending a six-month period of decline.
Adding to signs of recovery, new orders expanded at the fastest pace since May 2023 with many respondents citing a turnaround in sales pipelines and greater new business enquiries linked to the improving economic outlook and more stable financial conditions.
‘UK construction output returned to growth in March as a renewed expansion of civil engineering work was supported by more stable conditions in the housing and commercial building segments’, commented S&P Market Intelligence economics director Tim Moore.
‘The near-term outlook for construction workloads appears increasingly favourable as order books improved again in March and to the greatest extent for just under one year’, added Moore.
Construction companies generally commented on a broad-based rebound in tender opportunities, helped by easing borrowing costs and signs that UK economic conditions have started to recover in the first quarter of 2024.
