tag:www.contractjournal.com,2008:/blogs/brickonomics//163 2008-05-16T09:46:26Z Figuring out trends in housing, property and construction Movable Type 4.1-en tag:www.contractjournal.com,2008:/blogs/brickonomics//163.30569 2008-05-16T09:29:08Z 2008-05-16T09:46:26Z

Have you noticed that there is a new measure in town - the Gherkin. Here are two recent examples. In the story about CEBR's estimate of 6,200 job losses in the City one gherkin equates to just over 3,000 City...

Brian 6,200 job losses in the City one gherkin equates to just over 3,000 City jobs. In the story about the estimate by Drivers Jonas that there will be a tidal wave of excess office space in City one Gherkin equates to just shy of 1% of the total available office space in the City. Who needs a pole, perch, rod or acre when you have the Gherkin. Let me know if you spot any other examples.]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.30560 2008-05-16T07:45:34Z 2008-05-16T09:18:27Z

The latest Government house building figures appear to add weight to growing fears that unless there is a dramatic turnaround in fortunes the number of private homes built this year could fall by a quarter or more. A fall of...

Brian house building figures appear to add weight to growing fears that unless there is a dramatic turnaround in fortunes the number of private homes built this year could fall by a quarter or more. A fall of this scale would beat the 1974 drop of 24% in homes built for sale - the biggest post-War collapse in house building. ]]> RICS housing market survey posted its gloomiest figures yet - 95% of estate agents in England and Wales seeing prices drop. The line that the RICS is taking is that this is a sign of a broad fall in prices rather than a deep fall, with all regions suffering fairly evenly. But as the RICS spokesperson Ian Perry points out the fall in house prices is not the most significant of the problems facing both estate agents and the house building and construction industries. Transactions are the big issue and here there is a real problem. And this is what represents the biggest fear for house builders and the Government housing targets. The latest transaction figures for property sales worth more than £40,000 (predominantly houses) show a third fewer transactions in the first quarter of 2008 compared with a year earlier. And with the Council for Mortgage Lenders latest figures showing lending in March running at about half of the level of a year ago, there is little hope of a swift uplift in market activity. It is this very low level of activity that is prompting house builders to stall on opening up new sites. More worrying still is that about half of new homes in the pipeline are flats. Flatted-schemes are heavily reliant on forward sales and investors and by implication are much more sensitive to market sentiment than more traditional housing developments. The Caroline Flint gaff over the snapped Cabinet briefing note, shows that fears in Government over the house market are growing, but there remain questions within the industry over the poor response to date. Firstly, £200 million doesn't buy a lot in today's housing market. Secondly there are plenty of questions over whether this is the most appropriate policy response. The emerging view that the fall in house building this year could be as dramatic as 25% or more is looking increasingly less fanciful. This should be of considerable concern to a Government that has such ambitious targets to build 3 million new homes by 2020. The biggest collapse in private sector UK house building post-War is not really a good start on the way to that 3 million target. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.29118 2008-04-23T08:22:30Z 2008-04-23T09:14:18Z

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...

Brian 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... ]]> £20 billion in current prices last year. This is a big hit. So, roughly speaking, a 25% fall in house building actitivity would translate into a £5 billion or 4% drop in output overall. The relationship between output in housing unit terms and output in construction terms is not linear and the impact on construction will very much depend on what sub-market (flats, luxury homes, retirement homes) is hit hardest. There is also the paradox that work on flats under construction may speed up with house builders keen to complete and sell asap. So the impact is unlikely to be straightforward and simultaneous in time, place or by product. But whichever way you cut it, on the face of it this report is very scary. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.29075 2008-04-22T13:56:25Z 2008-04-22T14:54:50Z

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...

Brian 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). ]]> property transactions provide yet more gloomy evidence that the market is slowly gumming up. Transactions for February were the worst for three years and the trend is down. The survey suggests that employment among local builders fell in the first quarter. The FMB suggests that it will bounce back. That may prove rather optimistic.]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28910 2008-04-21T08:19:19Z 2008-04-21T08:52:33Z

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...

Brian 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.]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28850 2008-04-18T12:07:19Z 2008-04-18T12:39:48Z

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...

Brian 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. ]]> The picture is bleak across all three sectors - offices, retail and industrial. And these supply and demand figures combined do cast a dark shadow over the prosects for construction firms, as they will dampen enthusiasm for new schemes. This in turn is likely to leave a hole in construction output as current projects are built out and are not replaced by new developement. The RICS survey already suggests that there is a drop in projects being started. The irony is that the construction sector, if history repeats itself, may well be experiencing a boost to commercial workload on the ground as developers seek to complete schemes rapidly. This was very evident in the run up to the property crash leading into the early 1990s. tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28848 2008-04-18T10:08:59Z 2008-04-18T12:07:01Z

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...

Brian 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.]]> Global Economic Forum Team point out in an April 24 note on UK Banks & Economics. The central case view they present is that there will be a 30% fall in housing transactions and a 10% fall in nominal house prices this year. The prospects for next year are that house prices will fall a further 4% fall in nominal terms, meaning that over the two years there would be a 20% real correction in house prices. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28702 2008-04-16T11:35:40Z 2008-04-16T12:18:57Z

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...

Brian 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. ]]> mind you others are – there are some points in the detail of the figures with relevance to the construction industry. The firstly point to note is that earlier figures show that (using the workforce jobs measure) the construction industry employed fewer people at the end of 2007 (2,208,000) than it did at the end of 2006 (2,215,000). We really need to wait until the first quarter 2008 figures are out to provide more clarity on whether the recent dip in workforce jobs is just that, a dip, or whether numbers are on the slide. Still one point to note in the latest batch of labour market figures is that there was an increase in the numbers who have been unemployed for more than two years, up more than 4% on a year earlier. Further, among males aged 18 to 24 there was a 2.6% increase in the numbers unemployed compared with a year ago. More disturbingly, the increase in those unemployed for two years or more was 51.7%. The unemployment rate among 18 to 24 year old males is running at 13.8%, against 9.9% for their female peers. The figures show that within the population aged 18 to 24 there are 309,000 males and 192,000 females unemployed. This should be the most fertile ground for recruitment into an industry such as construction. And it may once again have to be, as anecdotal evidence suggests that the pool of hard working skilled Eastern Europeans is drying up. This would fit with the international comparison figures published in the latest labour statistics release. The two EU countries leading the league for fastest growing employment are by far Poland and Bulgaria. And with Germany now running third in the EU jobs growth league, the UK is starting to look relatively less attractive as a foreign destination for Eastern Europeans. Any thoughts more constructive than dismissing our current crop of 18 to 24 year olds as a bunch of wastrels that could do with a dose of national service? ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28562 2008-04-15T09:42:43Z 2008-04-15T09:52:11Z

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...

Brian 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.]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28556 2008-04-15T08:29:18Z 2008-04-15T09:52:51Z

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...

Brian 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.]]> comments made by RICS spokespeople is that the “house price correction” story has a long way to go before we really have a good indication of how bad things will get. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28288 2008-04-10T11:13:05Z 2008-04-10T11:49:33Z

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...

Brian 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.]]> Overall the February figure was up a fraction on a year ago. But orders figures bounce about a lot month to month. A more important view is to compare the latest three month figures with the same for a year earlier - and that throws up a few disturbing, but predictable, patterns. Housing orders were down best part of 20% on a year earlier - interestingly with the social sector down the most. Commercial orders on the same basis were down 8%. With longer-term contracts and generally more stable orderbooks, contractors should be better placed than in past downturns to weather the storm. But the figures are sufficiently serious to suggest that many firms will be taking a long hard look at the near future and how to adjust themselves to head off any pain. That said, it's nice to end on some good news and there is some in the figures - infrastructure orders are well up, for the time being at least. tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28245 2008-04-09T15:27:00Z 2008-04-09T16:30:07Z

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...

Brian 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.]]> the tide turns and they look to take their hard earned cash and much applauded skills back home. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.28034 2008-04-08T07:34:11Z 2008-04-08T13:00:45Z

As I speculated late last month there was a potentially nasty blow in the pipeline for the sales teams of house builders and at estate agents when the Halifax house price index was published. Well the figures have been published...

Brian a potentially nasty blow in the pipeline for the sales teams of house builders and at estate agents when the Halifax house price index was published. Well the figures have been published and show a monthly fall of 2.5%, the fastest since September 1992. This was worse than expected and puts the March 2008 seasonally adjusted average house price at £191,556 against £194,094 last March. A fall of 1.3%. ]]> annual rise of 1.1%, that is because in the small print - and quite sensibly - Halifax says that the annual rate of inflation is smoothed on a quarterly basis to take out the month-to-month bumps. The downside is that this process makes the headline figure less sensitive to real changes. But as in all statistics the measure you chose is a matter of horses for courses. But scrape away some of the rust and get down to the metal and you find the numbers presented could have been worse had key revisions not been made to two key previous published figures. If you look back at the historic figures published last month you see the seasonally adjusted average house price for March 2007 at £194,565 and February 2008 at £196,649. The latest set of figures shows they have been revised down to £194,094 and £196,465 respectively. Statistician regularly revise figures - particularly seasonally adjusted figures - in the light of new information received, although no other figures appear to have been revised other than these two. The point is that had the Halifax statistician decided not to adjust these two figures the change in the index would have looked just that bit worse, with the monthly drop at 2.6%. As I pointed out in the post on March 28, the April figures - even if they show a slight month-on-month rise - are likely to show the biggest turning point yet and we are likely to see Halifax's headline figure for annual house price inflation dip below zero. In August last year Halifax's unadjusted monthly figure for an average UK house was £201,081. That figure now stands at £190,619 a fall of 5.2%. Now that is sobering. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.27766 2008-04-02T14:52:58Z 2008-04-02T16:57:04Z

If the RICS construction survey is a good indication of what the future may look like, then the monthly Purchasing Managers Index produced by the Chartered Institute of Purchasing and Supply (CIPS) tends to give a fair indication of the...

Brian RICS construction survey is a good indication of what the future may look like, then the monthly Purchasing Managers Index produced by the Chartered Institute of Purchasing and Supply (CIPS) tends to give a fair indication of the mood of the moment. So when the March results released today showed the index turning sharply negative, it was a clear sign that the shakes felt in the financial markets last Autumn are vibrating in the construction industry right now. The main Index broadly measures the balance between those purchasing managers who saw activity expand and those who saw it shrink over the previous month and the March figure of 47.2 (against a no change mark of 50) was the worst for almost a decade. ]]> Activity Barometer survey results, released on Monday, also suggest that the industry is taking a big knock as a result of the financial turmoil spilling over into the property markets. But the interesting point to note in both surveys is the continued view that the future remains fairly bright for construction, if not as bright as it may have looked a few months ago. ]]> tag:www.contractjournal.com,2008:/blogs/brickonomics//163.27703 2008-04-02T09:31:26Z 2008-04-02T10:41:48Z

How worried should we be about the the findings by the surveyors body RICS in its latest construction market survey showing that the outlook for the industry is at its worst for a decade? The short answer is seriously concerned....

Brian construction market survey showing that the outlook for the industry is at its worst for a decade? The short answer is seriously concerned. But that is only a partial answer. It certainly does not address the fact that what seems like only yesterday there were plenty of experts predicting all manner of problems, with the industry by now in near meltdown swamped with work and bereft of talent. The most fanciful of those predictions now look as they did at the time – fanciful. But they do provide object lessons in the need to contain hyperbole. And there is a real danger that too much might be read into the RICS survey.]]> construction output figures show. And a quick scan through the comments from respondents at the end of the report confirms that the industry – leaving aside house building – is by and large still bubbling along reasonably nicely. So why should we be seriously concerned by the survey? Simple, it is a very good indicator of potential trouble ahead. And it offers some time for businesses to readjust to avoid the worst of what might, just possibly, befall the construction industry. ]]>