Construction output drops: housing supply is about to get even lower

Brace yourselves, property fans: house prices are about to go up again, thanks to lower-than-expected construction output in March.

by Emma Haslett
Last Updated: 02 May 2014

As we get closer to election time, parties are focusing increasingly on one thing: housing. The leader who can solve the housing crisis will win thousands of votes. It’s been about 80 years since we built enough houses to meet demand, though. Don’t expect a Eureka moment any time soon…

Still. It doesn’t look great for the coalition that the Office for National Statistics has just published figures showing after several months of growth, construction output actually by 2.8% fell in February from January, much worse than expected. Year-on-year, output grew by just 2.8%, compared with 5.7% in January. Ouch.

To be fair, part of the drop was down to the fact that the whole of the south west and half of the south east spent most of February underwater – less than ideal conditions for building.

But there’s no escaping the fact that the UK – and the south east in particular – is desperate for new homes, and figures like this will allow the coalition’s critics to pour scorn on its increasingly pathetic-looking measures to make builders build. Help to Buy may be one of George Osborne’s most successful policies, but an oft-quoted figure suggests 100,000 more homes need to be built a year to meet demand.

Still, Howard Archer, chief UK and European economist at IHS Global Insight, reckons March was a better month for construction, ‘given the much better weather and seemingly healthy underlying business’.

‘Repair work relating to the flood damage should also have helped construction activity in March, and it should continue to do so going forward,’ he added. Here’s hoping…

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