0.9% increase for the residential sector in 2019
28th February 2020
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The residential sector contract awards in 2019 were valued at £23.0 billion an increase of 0.9% on 2018. This follows on from 7.4% decrease in 2018. Following good growth in contract awards values between 2015 and 2017, there appears to have been some levelling off in 2018 and 2019. Key to this has been the faltering of consumer confidence and spending levels since 2017 and the continuing issues of affordability and availability of finance for new houses. Whilst the underlying demand for new housing remains strong the commitment to purchase has been impacted by the wider economic uncertainty that has been in evidence during the last two years. In addition, this hesitancy by consumers has meant that the build-out programmes for some larger housing developments have been extended.
Annual house price growth remains subdued with the latest data from Nationwide showing that prices in Q4 2019 were just 0.8% higher than for Q4 2018. The average house price in the UK in Q4 2019 was £215,925. Scotland was the strongest region with house prices increasing by 2.8% on a year ago. The Halifax indicated that on a monthly basis, house prices were 1.7% higher in December when compared to November and were also 4.0% higher than for December 2018. The caution evident in the market in H2 2018 has continued throughout 2019 with mortgage approvals remaining relatively static. From a regional perspective both London and the South East saw negative growth for annual house prices with London seeing decline of 1.8% and the South East down by 1.0%.
Maintaining its position as leading region for residential contract awards in 2019, London accrued share of 26.0%. This is an increase of 4.6% on 2018. The second largest region was the South East which accounted for 13.2% of awards, which is a marginal (0.5%) decrease on 2018. The region in third place with a share of 10.3% of contract awards in 2019 was the North West, a decrease of 3.7% compared with 2018. The largest residential contract award in London was Nine Elms Parkside Plots B &; D at Wandsworth in London which was valued at £276.4 million and will see Telford Homes provide a total of 894 build-to-rent apartments.
Other leading residential project in London included the £250 million redevelopment of Chelsea Barracks by Multiplex Construction to provide 97 apartments and the £240 million redevelopment of the Old War Office in Westminster by Ardmore Construction to provide a new hotel and 88 flats. In the South East, the largest residential award was the £102 million Guilden Park at Guildford College Campus which will see McAleer &; Rush Limited provide a total of 553 new student bedrooms in a single six storey structure.
In Reading, Berkeley Homes will provide a total of 765 flats as part of the £65 million redevelopment of the Former Gas Works Site at Kenavon Drive. Key residential awards in the North West region in 2019 included the £45.7 million redevelopment of Meadow Mill in Stockport by Awal Investment which will provide a total of 213 apartments; whilst in Warrington, Barratt Homes will deliver a total of 370 houses on the Appleton Cross site with the contract estimated at around £37 million.
Planning activity for the residential sector saw decrease of 8.6% in 2019 with the total value of projects reaching advanced planning stage of £53.9 billion compared to £58.9 billion in 2018 (see fig. 3.3). This slowing of the planning process indicates that the opportunities for growth in the commissioning of projects in 2020 will be lower than for 2019. There are a number of positives within the residential planning pipeline with the sector likely to maintain its lead position throughout 2020. However, the rate of onsite activity is likely to be lower in 2020 given the lack of buoyancy currently characterising the new housing market.
The UK residential sector has shown further evidence of slowdown in housing completions in 2019 reflecting the decrease in housing starts in 2018. Although the planning pipeline has declined in 2019, there are a number of larger-scale projects which should continue to underpin residential construction output into the short-medium term. However, there are a number of positive which could also affect the sector including the strength of underlying demand for good quality new housing. Whilst the private sector will continue to dominate in terms of housing completions volumes, the social housing sector is set to benefit from the variety of programmes put forward by the Government to significantly increase the number of new homes within the UK into the medium-longer term.