There is an air of cautious optimism filling the UK housing market and constructions sector following the general election of December 2019. The election result meant that a small amount of certainty was restored to the UK economy after months of concern around Brexit. However, with the outcome of Brexit still not known, it is important to remain cautious. Despite an increase in certainty, the economy is still set for a challenging 2020.
Optimism in Housing
There is a cautious optimism within the housing market, as it saw a boost after the general election. Typically, within the property industry January is steady as sellers with wait until Spring to launch their homes however developers have reported that there has been an elevated level of enquiries and forward orders which are well up on the end of last year. Whilst this is a promising sign, it is only to be viewed as an immediate reaction to the election result. Unfortunately, with trade talks on Brexit to continue until December 2020 there is still a lot of uncertainty in the air. Therefore Nick Whitten, JLL has predicted a steady 2020 after the initial wave of excitement. This is still a positive as it is suggested that 2020 will still be more positive than 2019 which suffered as a result of Brexit worry.
The housing market looks promising however from 2020 and beyond as the new government detailed in their manifesto that there would be a million new homes built during their five-year parliament. With promises like this on the table, the construction sector can rest a little easier.
First Time Buyers
First time buyers have played a major role in the housing market the past 5 years and with an increase predicted in access to 5% deposit mortgages, this is set to continue. Consumer research conducted by Lloyds Bank found that 43% of people think the biggest challenge for first time buyers is raising a deposit however with the increase in lower deposit schemes as well as longer fixed rate mortgage offerings it would appear first time buyers are in luck. This is promising news for the housing market as first time buyers play such a big role in the industry and their desire for new build projects is as strong as ever.
With undoubtable pent up buyer demand following the uncertainty of the general election and concerns over Brexit, there is set to be an increase in the number of new projects; especially considering the government promising on new housing. According to Tim Moor, Economics Associate Director at IHS Markit the decline in new construction activity in 2019 can be blamed on both Brexit uncertainty and spending delays ahead of the General Election. With the election behind us, there is only the uncertainty of Brexit to hinder the industry. With the end of 2020 set to see the end of trade talks with the EU, there should be more clarity this year. Tim Moore stated that even with Brexit talks still happening, the election had helped already with recovery. He found that construction companies had signalled that there was a recovery in business optimism; making it the strongest it had been for nine months. It is believed this optimism is a direct result of a clients’ willingness to spend based on a more predictable political landscape.
What does this mean for Construction?
Its all well and good there being a predicted increase in housing prices and hope for the housing market, but what for the construction industry? Without an increase in new projects or larger commercial developments, the industry may not see the increase in revenue it was hoping for. However, post-general election, construction sector analysts, Glenigan, have announced there is a predictive rise in the value of project starts in 2020 to 2% and a further 5% in 2021. In particular, the housing industry, education, health and civil engineering industry should be feeling optimistic. Coupled with a government promise for more infrastructure spending, the construction industry should be experiencing a boost soon enough.
Trends in Construction for 2020
With the construction industry looking to benefit from a higher degree of certainty in the UK’s political landscape, it is important to consider what some of the trends may be for the industry heading into this decade.
As previously mentioned, Brexit is still playing a huge role in the construction industry. Although there is now a set date on when the UK leaves the EU, trade talks are still going to be taking place until December 2021. This means a continued level of uncertainty around how the UK is going to trade with Europe and what a Brexit Britain actually looks like.
With the issue of global warming and sustainability being made to be higher up on the agenda than ever before, 2020 will see the construction industry having to take greater responsibility for sustainable projects. Expect to see clients who have an interest in the environmental impact of their projects as well as requiring the environmental credentials of their suppliers and contractors. It is likely we will also see an increase in investment of green infrastructure and cleaner energy.
With many big promises being made by the new government in relation to both housing projects and large-scale infrastructure projects. If these plans come into fruition it will see a major boost in new projects which is what the industry requires. The certainty the new government brings with it is also predicted to bring with it a wave of private sector investment, therefore hopefully a boost in commercial projects also.
2020 is set to see a push from Scotland for a second referendum on their independence from the UK. This potential referendum would see a Brexit style process which would again cause some big investments deferred and a concern over the certainty of the economy.
The view for the upcoming year and beyond is positive but does rely upon specific factors and their outcomes. After years of uncertainty, this year is set to see that end which sparks optimism in those within the industry and leading economic researchers. A lot of the hope for the future relies on the abundance of new projects which are predicted for the upcoming years; these new projects would benefit every aspect of the industry.
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