Financial News

  • 4 December 2013, 12:22

Housebuilding Grows At Best Pace For A Decade

Housebuilding grew at its fastest pace for a decade in November amid surging demand buoyed by Government initiatives.

Figures from the closely watched Markit/CIPS purchasing managers' index (PMI) for construction showed housing activity at its highest since November 2003 while job creation was at a six-year high.

It helped overall PMI for the sector accelerate to its best level since August 2007.

Markit chief economist Chris Williamson said the housing figures suggested the number of new home starts had risen to 40,000-45,000 per quarter in recent months, up from 28,000 at the end of last year.

It meant, he said, that the wider improvement in the UK economy was more likely to be sustainable with the boost in housing supply helping to meet buoyant demand.

Combined with improvements in manufacturing data, the figures also added to the likelihood that gross domestic product growth could accelerate to more than 1% for the fourth quarter, he said.

The construction upturn came as demand for property is spurred by the Government's Help to Buy scheme to help would-be homeowners struggling to find a deposit, as well as low interest rates.

Meanwhile, the Funding for Lending scheme to improve borrowing conditions has proved so successful in helping the mortgage market it has had to be cancelled and refocused on small businesses.

But the PMI figures also showed commercial construction growth accelerating while civil engineering continued to expand, albeit at slightly below the pace it managed the previous month.

Mr Williamson said: "The survey indicates that the construction upturn is not simply predicated on a housing market boom fuelled by Government initiatives and low borrowing rates."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "What is particularly encouraging and bodes well for the sustainability of the construction upturn is that the improvement in activity is now widespread across sectors while incoming new business is elevated.

"If consumer spending gains appreciable momentum as Christmas gets ever nearer, fourth quarter growth prospects for the economy will be looking very bright."

However, the construction sector remains a long way off returning to its best levels, with latest official figures showing it was 13.3% off its pre-recession peak.