The housing construction market is expected to rebound strongly in 2023 after a year of slowing activity and is expected to cool further.
Despite the mini-boom following the Covid shutdowns of 2020, 2021 has seen a cooling in house building thanks to the withdrawal of the temporary stamp duty reduction and buyer confidence has been hurt by weaker incomes households, higher taxes and interest rates.
According to the latest construction forecast for 2022-24 from analyst Glenigan, this cooling in housing construction should accelerate in 2022 thanks to inflation and further interest rate hikes. All of this, according to the report, will see activity in the housing construction sector fall by 5% this year.
Private housing starts in 2021 were worth £27.7bn in 2021 and are expected to fall 5% to £26.2bn in 2022.
The report however predicts that this will increase again by 14% in 2023, reaching £29.8 billion, rising again by 1% to reach £30.2 billion in 2024.
The construction market as a whole is expected to grow by 7% in 2023 and again by 2% in 2024.
The report says of the private housing sector: “High inflation, weaker household incomes and rising interest rates should dissipate the recent surge in housing market activity. We expect project starts to fall 5% in 2022, but when conditions turn more favorable for homebuilders, the sector is poised to reap the benefits. Private housing detailed planning approvals increased by 14% in 2021 and contract awards have steadily strengthened since mid-2020. We therefore expect further housing market recovery towards the second half of the forecast period, helping housing starts to rebound 14% in 2023 and strengthen further in 2024.”
Meanwhile, the latest Halifax House Price Index shows that house prices defied expectations of a slowdown and rose 1.8% in June, which was the twelfth consecutive monthly increase and the largest rise monthly since 2007.
Halifax managing director Russell Gallery said: ‘The UK property market has defied expectations of a slowdown, with average house prices up 1.8% in June – the biggest monthly rise since the start. of 2007. This means that house prices have now increased every month for the past year. , and are up 6.8% or £18,849 in cash terms so far in 2022, pushing the price of typical UK property to another record high of £294,845.
He added: “Property prices so far appear to have been largely insulated from the pressure of the cost of living. This is partly because the rising cost of living is currently being felt most by low-income people, who are generally less active in buying and selling homes. High-income earners, on the other hand, will likely be able to use the extra funds saved during the pandemic, with the latest industry data showing mortgages rose by the highest amount since last September.