A survey released yesterday reveals that British construction activity grew at the fastest pace in nearly six years in August, largely driven by residential building.
As house prices in the UK have risen in recent months following years of stagnation, there have been concerns that prices will boom uncontrollably unless new houses are built.
However, the latest Markit/CIPS construction purchasing managers’ index (PMI) revealed that residential building output picked up at the fastest pace since June 2010 last month – sparking further hopes that the UK’s beleaguered economy is turning a corner.
“The latest construction PMI figures are yet another indication that the UK economy has performed impressively over the summer months,” said Tim Moore, senior economist at Markit.
Last week, Nationwide Building Society figures revealed that house prices in the UK rose by 3.5 per cent in the year to August 2013, and by 0.6 per cent over the month, causing Robert Gardner, Nationwide’s Chief Economist to warn that more new homes are needed.
“While there have been encouraging signs that house building is starting to recover, construction is still running well below what is likely to be required to keep up with demand,” the economist warned. “New housing starts in England were up 33 per cent in the second quarter of 2013 compared to the same period of 2012, but this is still 36 per cent below the levels prevailing in 2007, which were already below that required to keep pace with household formation.
“The risk is that if demand continues to run ahead of supply affordability may become stretched.”