Experience Invest Company Checks
House building is a crucial cog in the machine that is the UK property market. In this article, London-based property specialist Experience Invest company checks the state of the UK’s construction industry.
Whether it’s the owner occupier sector or the private rented market, making sure that there are enough homes to meet demand is vital in ensuring that prices are not too high and that property is affordable to the average tenant or owner.
The prevailing political uncertainty that is currently in evidence across the UK is making it far more difficult for the building sector to keep up with demand. Despite the government’s promises to build 200,000 more homes every year until 2021, the hung parliament and concerns over Brexit are still causing the sector to stutter somewhat.
It’s the latter of these that is perhaps most problematic to the construction market. Building companies faced with the Brexit outcome are worried about a number of pressures on their operations, including both the costs for labour if movement across the EU is restricted, and the cost of materials in a less open marketplace.
According to the latest Markit/Cips purchasing managers’ index, released earlier this month, uncertainty in the political sector is causing companies to be more cautious in the building sector, taking on fewer workers as they wait to see the outcomes from the widespread changes.
The index shows a figure of 51.1 for August this year, down from 51.9 in July. While this still indicates growth, which is a good sign, (50 indicates stagnation), the fact that growth is so marginal will be a concern for the sector as whole. In fact, the reading for August marks a one-year low in terms of growth.
As a result, experts are starting to worry that the market is flirting with recession in the months ahead. The fact that this comes at a time when there is such a demand from tenants, buyers and investors will be a worry for the sector.
This is, perhaps, where newer sectors can step up to the plate, however. Even though the market for building on the whole is growing at a slower rate than it has in the past, there are still some areas that are thriving. For example, the Build to Rent sector has become a more prominent factor in the market than it has ever been before this year.
In total, there are more than 80,000 new homes in the works or completed for the rental sector, according to the British Property Foundation, indicating that this is an area in high demand. Developers are seeing that there is both a need for purpose built rental accommodation from those who want to rent, and a strong demand from investors for homes that meet those desires.
So, what does this mean? Even at a time when there are evidently issues in the building sector, the fact that one arm is still doing well shows that there is real potential for growth if things are done right. When target markets can be identified in the way the Build to Rent sector has done it, and homes can be built to meet what those people want, then even at times of uncertainty, building really can thrive on the back of strong demand.