Housing output fell 5% in November

Private housebuilding work fell by nearly 5% in November as housebuilders responded to the post mini-budget drop in demand from homebuyers, according to the latest official construction output figures.

The latest data from the Office for National Statistics showed the private housing sector saw a £172m drop in output in the month, to just over £3.4bn, making it the largest negative contributor to what was flat growth in the month for construction overall. With public housing output also falling by 5.3% to £416m in the month, the overall drop in housebuilding output was 4.9%, to £3.8bn.

The ONS also said the second largest negative contributor to construction growth, after private housebuilding, was private repair and maintenance spend, a sector which is often linked to home-buying decisions, underlining the weakness in the housing market.

The data comes after a string of major housebuilders have this week reported a dearth of buyers in the final months of last year, with Persimmon yesterday saying it sold as few as 0.19 homes per site per week in the last seven weeks, and that it had put up to 30 site openings on hold.

The data show that quarter-on-quarter private housebuilding output was flat, with public housing output 2.7% down. Year-on-year, private housebuilding output in the month was however still well up on November 2021, with a rise of 10.7%.

The ONS data showed other parts of the construction sector saw month-on-month growth, allowing the industry to post flat growth overall. Seasonally adjusted, the volume of worked remained at almost exactly £15bn.

Growth in new work was seen in the buoyant infrastructure sector, which rose 4.2% in the month and is now 15% above the level seen pre-covid, as well as in public sector building, up 3.1% in the month and private industrial work, up 7.2%. The private commercial sector also saw growth of 0.3%, taking it’s output to £1.8bn – albeit still well below pre-covid levels.

Despite this, total new work fell in the month by 0.4% to £9.2bn due to the housing declines, while the value of repair and maintenance grew on the back of public housing and non-housing investment, by 0.6% to £5.8bn.

Iain Crawford, CEO of Alliance Fund, said that while a softening in construction output during November is “always likely” following the traditionally stronger summer period, there was now “growing uncertainty surrounding the wider property market.”

He said: “With both the construction of new housing and new work seeing a reduction in output, it appears as though the sector may have paused for thought more prematurely than usual, in order to fully consider the implications of the wider economic backdrop and how best to negotiate them in 2023.

He added that he didn’t foresee any “notable long-term decline in construction output in 2023.”

James Worthington, Partner at law firm Charles Russell Speechlys, said the data were a “sign that the industry may be suffering during a difficult period.”

“The rising price of construction materials, threat of recession and ongoing economic challenges are all contributing to significant uncertainty across the sector, from investors to developers.

“Government intervention through tax relief and extra support is needed to prevent future downturn in the sector - an industry that is likely to be amongst the hardest hit by an increasingly challenging economic environment.”