Builders step up supply of new homes

Construction companies raised output at the fastest pace in more than two years last month, with residential property building increasing rapidly in a boost to the government’s ambition to lift housing supply.
The S&P Global construction purchasing managers’ index for September climbed to 57.2 from 53.6 in August, well above the 50-point mark that separates growth and contraction. The index also topped City analysts’ expectations.
Output in the industry was driven higher by an upturn in residential housing, with the sub-sector reading hitting 54.3 in September, the best since March 2022. Experts attributed the rise to expectations for stronger demand in the property market caused by further interest rate cuts.
The Bank of England lowered the base rate to 5 per cent in August, the first cut since March 2020, and could lower it at each meeting between November and May, according to RBC Capital Markets, an investment bank.
Since that reduction, home buyer interest has perked up and property sales have accelerated. According to Zoopla, the property search site, the number of transactions agreed in September climbed by 25 per cent on an annual basis.
Tim Moore, economics director at S&P Global Market Intelligence, said: “UK construction companies indicated a decisive improvement in output growth momentum during September, driven by faster upturns across all three major categories of activity.
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“A combination of lower interest rates, domestic economic stability and strong pipelines of infrastructure work have helped to boost order books in recent months.”
Labour has promised to build 1.5 million homes during this parliament and has bet on loosening regulation in the planning system to stimulate supply. The UK has only achieved this goal in the past when the state has directly built homes.
Matthew Pointon, senior commercial real estate economist at Capital Economics, a consultancy, said: “The prospect of lower interest rates, rising capital values and a government committed to boosting home construction all helped to raise developer confidence.”
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, another consultancy, said: “The forward-looking parts of the PMI suggest that the strong growth will continue.
“The new orders index jumped to 57.4 from 55.3 in August, also a 30-month high. Admittedly, the future activity index slipped to 70.1 in September, from 70.7, the lowest since April. We think some of that drop could be related to uncertainty over the upcoming budget, which should fade.”
The commercial building sub-sector index reached 55.2 in September, while the civil engineering index climbed to 59 thanks to strong demand for renewable energy infrastructure.
Growth in activity and expectations for positive future trading conditions led construction firms to hire more workers in September.