Following the release of the latest UK Construction PMI on the 6th October 2022, Brendan Sharkey, head of construction and real estate at MHA, says that despite the sector’s continued growth, the hike in interest rates and spiralling mortgage crisis threatens the sector’s property market continued success:
“Despite the cost of living and energy crisis gripping the country, the construction sector has of late coped with inflationary pressures by adjusting prices to maintain margins. While the economic landscape, coupled with the falling value of the pound, may deter UK investors in the immediate term, thereby impacting on future projects and slowing productivity, there is no slowdown of work for the sector as it stands.
“For the housing market, demand continues to remain strong however this will undoubtedly dip in the months ahead. The mortgage crisis following the Bank of England raising interest rates to 2.25% eliminates any economic benefits gained through the reduced stamp duty rate. Ultimately it creates zero incentive for homeowners to move or buy and potentially limits the ability and appetite of first time buyers from getting on the property ladder. Property prices should stabilise at best, but if employment falls expect to see falling prices.
“Last week’s mini-budget failed to produce any clear policies that provide additional support for the sector, meaning businesses face an uncertain future. The introduction of Investment Zones, while designed to stimulate economic activity and housing development within local economies, lacks sufficient detail on how the zones would work, the planning details required and the approval process. As a minimum the Government must address these points to enable the sector to fully grasp the opportunities it will present.
“The Government should reintroduce tax relief on mortgage interest for first-time buyers to stimulate the property market. This relief would run alongside the first-time buyers stamp duty reduction making an attractive incentive to both the buyer and developer. Ultimately, the Government must deliver their promises on time, without delays and with clarity to ensure that activity within the construction sector continues to flourish.”