Brickonomics

Reading the news in the FT that Merrill Lynch's Mark Hake, the longstanding construction industry analyst, has downgraded house builders was not good to hear.

But more worrying to the industry as a whole is that he seems to be suggesting industry volumes will drop by a quarter this year. That is huge. It is as large as the peak-to-trough fall in the housing recession of the early 1990s.

I haven't seen the detail of the note yet and imagine there must be some nuance in the definitions, but if what he appears to be suggesting turns out to be close to what actually happens on the ground, then a construction recession this year suddenly looks much more likely. Which leads me to believe I am missing something.

But it is worth looking at the figures...

Continue reading "Will house building lead construction into recession?" »

Local builders appear to be taking a bashing as a combination of householders with less money in their pockets and a freezing housing market takes its toll.

Each quarter their trade body FMB conducts a state of trade survey where it measures (among other things) the balance between those seeing workload rise and those seeing it fall. The figure for the first quarter of this year came in at -8 compared with +6 at the end of last year.

This sharp fall was perhaps predictable, as the fourth quarter 2007 survey had shown one of its worst ever figures for new enquires (a balance of -14).

Continue reading "Small building firms squeezed as housing work shrinks" »

Each week with each piece of data and each new forecast the balance of probability weighs increasingly heavily on the side of house prices falling rather than remaining flat this year.

Today we see released the spring Item Club economic outlook for business and the latest Rightmove figures on asking prices for housing. Both are substantially less confident about house price than at the start of the year. Rightmove has eased on its confident postition of a flat market this year and the Item Club has moved from its winter forecast position of a flat market to 5% falls this year and next.

But to comfort those who are unduly fearful, David Miles (one of the Morgan Stanley team forecasting a 20% real-term fall in house prices) writing in the Sunday Telegraph suggests this is not as frightening a prospect for most of us as we may fear.

The latest RICS survey on commercial property demand makes grim reading.

Two figures are particularly worrying for the construction sector. Firstly: The balance of surveyors reporting demand down against those seeing demand rising was 30%, the worst figure for six years. Secondly: The balance between surveyors saying there was more available space against those reporting less was 27%, a rapid change from previous quarters when there was a fairly even balance.

Continue reading "Commercial property demand plummets" »

There was little joy in today's release of the Council of Mortgage Lenders March figures for lending, as they reinforced data pointing to a weakening housing market.

Lending was up 5% on February, but the normal 20% March jump was absent with the figure 17% down on a year ago. Worse still is the likelihood that when the more detailed figures are released (splitting loans between house purchase, remortgage and other) they will show that lending for house purchases extremely muted.

Continue reading "Slowing lending points to worsening housing market" »

At last some good statistical news for the Government – unemployment down – employment up – an increase in the number of vacancies.

This boost will be particularly welcomed by both the Chancellor and Prime Minister, as the employment figures are so far proving to be their strongest card in their quest to convince the nation that the UK economy is on a firm footing.

Continue reading "As Poles depart - what then?" »

If the RICS housing market survey has failed to provide enough gloom, here's the story from across the Atlantic. Foreclosures (repossessions) in March up 57% on the same month a year ago, according to RealtyTrac, an online marketplace for foreclosure properties.

RealtyTrac also suggests that things are so bad that more defaulting homeowners are simply walking away and leaving their properties to the bank. Memories, and bad ones, come to mind of the early 1990s in the UK.

The latest poll of estate agents by the surveyors body RICS produced the gloomiest set of figures on house price falls in the poll's 30 year history.

According to the latest monthly RICS housing market survey, the seasonally adjusted figure for the difference between the proportion of agents seeing house price rises and price falls was 78.5% in favour of those seeing a fall. That is much gloomier than February’s pretty gloomy figure of 64.1%.

So far so bad. But there are interpretations of these figures, fairly equally balanced, that might lead to a more pessimistic view on what the data means or a less pessimistic one, depending on what you want to focus on.

Continue reading "Worst housing market figures we've recorded, says RICS" »

The Bank of England's much expected decision to cut interest rates by 0.25% to 5% will provide a little short-term relief to worried managements within the construction and property sectors - although there will have been many crossed-fingered directors hoping for a 50 basis point cut.

And certainly the contracting fraternity must be starting to sense a cold chill heading its way. The latest data has all been gloomy and the construction new orders figures for February suggest that the flow of work in the pipeline for both the housing and commercial sectors is easing.

Continue reading "Base rate cut provides some relief as property-related orders slide" »

The latest construction research note from the surveyors' trade body RICS takes an interesting look at the current state of the US and UK construction sectors. The underlying question RICS asks is whether the UK industry will follow the US into a recession.

The headline grabbing data from the US are disturbing - housing starts down 54% from the 2005 average and a 34% drop in the value of private house building since February 2006. These are not figures that would be welcome here in the UK.

Continue reading "Will UK construction follow the US into recession?" »