Following the release of the latest UK Construction PMI today, Brendan Sharkey, head of construction and Real Estate at MHA, believes buoyant housing demand and good management of supply chain issues mean the construction sector is holding up:
“The UK construction sector, particularly the residential housing market, is coping relatively well despite the ongoing cost of living crisis. Momentum may have slowed but given the circumstances, the sector is holding up well. The economy may be tough for many but the pandemic was actually good for household savings, allowing people on relatively modest incomes to build up a war chest which they can now put towards a deposit. In addition, supply chain issues are no longer causing acute problems. Contractors and developers are usually able to get their hands on construction materials. Construction is a low margin business and some contractors will be running at a loss at the moment but the more financially stable companies are well placed to survive even if market conditions deteriorate.
“The sector isn’t crying out for government help but one issue the government needs to start considering more seriously is raising awareness of energy performance regulations among the public. Legally an EPC (energy performance certificate) is a requirement before selling a property. In 10-15 years’ time homes that don’t meet stringent energy performance standards will be unsellable. Some buyers definitely know this and this is one reason why demand for new build properties is strong (as they are EPC compliant) but the government hasn’t explained to the average buyer how risky the purchase of a second hand home that falls short of energy efficiency standards will become. There is a sense ministers don’t want to rock the apple cart but it is crucial more buyers take a long-term view and invest in energy efficient properties or recognise what they are buying will need a retrofit during their ownership.”