Construction output to fall 2.1% during 2024

Construction output is forecast to fall by 2.1% this year due to falls in private housing newbuild and repair, maintenance and improvement (RMI), according to the Construction Products Association (CPA).

The CPA forecasts that construction output will then rise by 2.0% in 2025 in line with falling interest rates and a general economic recovery which, in turn, could ease challenges in the housing and RMI sectors – the two largest construction sectors.

Recent disruptions in the Red Sea, however, have been identified as a key risk to the forecasts, potentially leading to supply issues such as delays and accelerating cost inflation.

Private housing suffered a double-digit fall last year after a spike in mortgage rates hit housing market demand. Many housebuilders have reported a 25-35% fall in demand, in addition to the regulatory issues that smaller housebuilders continue to face around planning.

The lagged effect of higher mortgage rates is likely to continue to weigh upon property transactions this year, with private housing output expected to fall by a further 4.0%.

Looking to next year, a gradual fall in interest rates should boost demand with private housing output expected to rise by 4.0%. However, interest and mortgage rates are not expected to return to the record lows seen in 2021 anytime soon.

The lack of a government policy stimulus to help overcome high deposit and mortgage payment requirements, also means the peaks in housebuilding seen in 2022 are unlikely to be seen again until at least the end of the decade.