Housebuilding falls for 11th month in a row amid slump in demand for new homes

Housebuilding has fallen for 11 months in a row as high borrowing costs hit demand for new homes.

Across the construction sector, new work continued to fall more quickly than at any time since the first pandemic lockdown.

The slump was steepest in house building, followed by civil engineering.

S&P Global said its activity index in the UK construction sector – where scores below 50 show contraction – came in at 45.6 in October.

The analytics group’s report noted ‘signs of stabilisation’ in commercial building.

‘Falling work on residential construction projects was widely linked to a lack of demand and subsequent cutbacks to new projects,’ the report said.

On a more positive note, builders saw the cost of doing business fall at the fastest pace for 14 years, with the price of materials such as timber and steel, as well as transportation, on the slide.

In particular, there was a steep fall in housebuilding, according to the S&P Global and CIPS UK construction purchasing managers’ index (PMI), with the sector declining for the eleventh successive month. The Bank of England has raised interest rates from a record low of 0.1 per cent to a 15-year high of 5.25 per cent since December 2021 in a battle to get inflation under control.

That has pushed up mortgages, and while it is hoped interest rates have peaked, a cut is not expected until well into next year.

Higher borrowing costs have slammed the brakes on the housing market, with builders scaling back construction plans.

“High-interest rates and low consumer demand for new homes continue to drag down the UK construction sector, with a lack of new tender opportunities and a cutback of existing projects being reported across the house building industry,” said Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply (CIPS).