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Glenigan index falls 31%

26 Apr 11 A sharp decline in the underlying value of private housing starts during the first quarter of 2011 has driven the Glenigan Index for March down by 31% year-on-year.

"The weak first quarter of 2011 is in sharp contrast to the strong rebound experienced a year ago in the run-up to the general election. The construction industry has been hit by reduced government investment and continued private sector weakness, with private housing experiencing the biggest contraction," said Glenigan economist James Abraham.

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He added: "Glenigan recorded a 61% year-on-year fall in the underlying value of new private housing project starts during the three months to March compared with a year ago. This follows NHBC reports of more modest declines in the new home registrations in February compared to a year ago and indicates that, faced with renewed housing market weakness, developers are continuing to build out existing schemes but are opening up fewer new sites.

"Whilst Glenigan expects house building activity to gradually improve over the course of the year, the latest data highlights that, with households income squeezed, market conditions remain fragile. Against this background, the Budget announcement of the £250m First Buy programme and favourable changes to the way Stamp Duty is charged on large developments will hopefully help lift developer's confidence and the flow of new project starts over the coming months."

Elsewhere, the Glenigan non-residential index contracted by 19%. Mr Abraham said: "Government spending cuts have already ensured a modest decline in the value of health, education and community & amenity builds, further retrenchment is anticipated from the start of the new financial year in April."

This decline was outstripped by the drop in private non-residential building. The underlying value of office starts fell by 45%, while retail starts were 27% down. Mr Abraham said: "This reflects private sector nervousness over low economic growth, high inflation and poor retail sales."

The underlying value of civil engineering project starts fell by 16%. Mr Abraham added: "While civil engineering work is still below the first quarter of 2010, there has been a significant recovery compared to three months ago. In addition, in the last three months there have been some major projects starting, such as the redevelopment of Victoria Street tube station in London, which were not represented by the underlying trend."

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