Housebuilding Construction Drops For First Time Since 2020

The housing market is in bubble at the moment, with prices increasing at record speeds. However, this is not being reflected in the rate of building of new properties, as construction output dropped last month.

The S&P Global Purchasing Managers’ Index (PMI) for the construction industry recently revealed activity declined from 56.4 in May 2022 to 52.6 in June.

It was also identified as the weakest area in the construction industry, with activity falling behind other sectors for four consecutive months, Yahoo! Finance reported.

S&P’s Global economics director Tim Moore noted: “The gloomy UK business outlook and worsening consumer demand due to the cost of living crisis combined to put the brakes on construction growth in June.”

According to the PMI, a level over 50 indicates the industry is expanding. However, housebuilding has had a subindex of 49.3 lately, with work dropping for the first time since 2020.

Despite this, more than a third of construction companies believe there will be an increase in business activity in the coming months, compared with just 17 per cent who anticipate a decline in output.

Joe Sullivan, partner at accountancy group MHA, noted that slow activity could help protect the housing market. While economists worry that the property bubble will burst, as affordability declines and mortgage rates increase, the lack of available homes could prevent a significant drop in prices.

“The restriction in the supply of new plots is the key factor which will guard against the house ‘price bubble’ bursting significantly,” Mr Sullivan stated.

This comes after Halifax recently reported house prices have surged by 74 per cent over the last ten years.

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