The private rented sector is growing from strength-to-strength.
With a constant flow of new enquiries and start-ups coming onto the market, it is driving growth and development in construction.
In comparison, other areas of the sector such as infrastructure and commercial building projects remain inconsistent and often unreliable in workflow and output, as was evident in the latest ONS figures for Output in the Construction Industry.
Although there have been signs of improvement across the sector in Q3 2014, it has remained slower than anticipated, for the third quarter running. This is in itself is slightly concerning, as in light of the promising improvements seen across the economy in general, we would expect the construction industry, as a key indicator of economic health, to be racing ahead in terms of output and turnover.
“It is only the housing sector, most notably PRS, that is outperforming the rest of the industry”
Yet it is only the housing sector, most notably PRS, that is outperforming the rest of the industry, sustaining momentum and ensuring the market remains healthy.
A slowdown on year-on-year growth across the wider sector compared to the same point last year, where annual growth was 5.8 per cent in September 2013, down to 3.5 per cent in September 2014, can be attributed to a number of factors, which are affecting the industry.
Most notably a shortage of skilled workers to fulfil the growing demand, such as bricklayers and electricians, is putting pressure on supply and demand and is in turn pushing up costs. This will continue to hinder the rate of growth until viable solutions can be found.
If the rate of growth in areas such as PRS, along with the overall construction industry is to be maintained, there must be further investment and a commitment to filling the skills gap so that projects can be delivered. Whether this is on-the-job training, sponsored apprenticeships, or a direct government injection of cash into training schemes, it is essential action is taken now.
Returning to the growth seen in the housing sector, it is important to understand why it has remained an attractive proposition for construction, over other sectors. In summary, it is the direct profit available in the sector, both in the short and long term.
“It is essential action is taken now”
Residential’s reliability as a work source and strong financial returns has solidified the sector as an important foundation for the industry. This is especially the case with PRS, which again has outstripped growth seen in the broader housing industry.
Due to the nature of PRS, with its consistent demand and steady, long-term return on investment, along with the drive for public sector housing and an increase in new builds for the likes of universities and care facilities, growth is set to continue. Looking to the future, we would predict housing, and in particular PRS, to lead the way in the construction sector over Q4 and further ahead.
Gavin Gleave is the chief executive of integrated managemennt company, Front3 Group