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Major forecasters revise down projections as housing growth weakens

Two leading industry forecasters have revised down their projections for construction output growth over the next three years.

Both Hewes & Associates and Experian have predicted that growth in construction output will slow, driven by a weakening private housing market.

Experian now forecasts 5.5 per cent growth in all work volumes in 2015, down from the 6 per cent growth it predicted as recently as January.

This is followed by 3 per cent growth in 2016, down from 3.4 per cent, and 3.4 per cent growth in 2017, down from 4.1 per cent.

Hewes & Associates expects a more dramatic slowdown, forecasting 2.8 per cent growth in output this year, having predicted 3.6 per cent in its previous forecast in January.

Its new forecast also predicted a 1.6 per cent decline in 2016 and a further 1.5 per cent fall in 2017.

The forecaster said these were “close” to its predictions last year, but would have been stronger “were it not for our forecast of a slowdown in private housing”.

Forecasts from the Construction Products Association released earlier this week were more positive but still showed that the rate of growth would subside over the next three years.

The CPA predicted 5.5 per cent growth this year, 4 per cent growth in 2016 and 3.4 per cent in 2017.

The private housing market’s predicted slowdown has been the main driver behind the revisions, with forecasters also expressing concerns about the health of the market as a whole.

While the CPA expects that private housing will “continue to drive the housing market this year”, growing by 10 per cent in 2015, forecasts from Hewes & Associates are more cautious.

Hewes & Associates said it was concerned by the falling number of mortgage applications in the latter half of the year, while Experian noted that “starts, transactions and house prices have all experienced declines or a deceleration in growth rates” during the latter half of 2014 and early 2015.

Experian’s forecasts pointed to 2 per cent growth in total housing output in 2016, followed by 3.4 per cent growth in 2017, while the CPA predicted 4 per cent growth and 2 per cent growth over the same periods respectively.

Hewes & Associates said total housing output forecast will fall by 3 per cent in 2016, with a further decline of 2 per cent predicted in 2017.

Despite this, Experian argued that latent demand in the housing market is still strong.

As a result, housing forecasts have only been revised down for 2015 by two points – down to 8 per cent growth from the 10 per cent growth forecast last winter.

According to the CPA, private housebuilding output in 2017 will still be 19.2 per cent lower than its 2007 pre-recession peak.

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