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Private housing recovery falters

The value of private housing starts has fallen for the first time in nearly a year, according to data from business intelligence unit Glenigan.

The latest Glenigan Index showed there was a lower value of new private housing projects in the three months to August 2010 than in the same period a year earlier.

This marks the end of a fragile recovery after nearly a year of sustained growth in the private residential sector.

In addition, the value of new social housing projects fell by 30 per cent for the three months to August 2010, leaving Glenigan’s residential index for August 14 per cent down on a year ago.

The sharp fall confirms a dismal period for the house building sector.

A report published by the National Housing Federation this month said 100,000 planned homes had been scrapped since regional targets were abandoned by the government.

Meanwhile, the Construction Purchasing Managers’ Index suggested the whole sector had been particularly hard hit in August as overall construction growth slowed.

The report, from the Chartered Institute of Purchasing and Supply in conjunction with Markit, recorded an index reading of 50.6 for August, where 50 represents no change from the previous month.

Glenigan said although social housing starts were unlikely to recover soon, it forecast an increase in private housing starts at the end of 2010.

Economics director Allan Wilen told Construction News: “While social housing starts are likely to remain under pressure over the coming months, a return to growth in private housing starts is anticipated at the end of the year as housebuilders capitalise on gradually improving market conditions and last winter’s poor flow of new work is bettered.”

However, mortgage availability and planning approval problems still lie ahead for housebuilders.

Housing minister Grant Shapps has pledged the government would match the first six years’ of council tax receipts for every new house built in England. The New Homes Bonus would be worth a total of about £8,500 for a new Band D home.

But the NHF last week warned that the government’s planned council tax matching scheme was aimed too low and targeted too poorly to make up for the loss of regional targets (CN, 9 September, p16).

However, NHF policy officer Brian Robson said county councils would reap the benefits of the scheme, while district councils would be responsible for making planning decisions. He added that matching council tax would represent a very small part of councils’ budgets.

The overall Glenigan Index fell by 6 per cent in August year-on-year, highlighting concerns the private sector recovery would not be sizeable enough to cover for the decreasing pipeline of public sector work.

While the value of retail starts was up 43 per cent year-on-year, and the hotel and leisure sector was up 34 per cent, the office sector was down 37 per cent.

Infrastructure starts were up 24 per cent, bolstered by a strong period in June. The regulated utilities sector was up 18 per cent.

While health starts were up 5 per cent, the education sector - which was hit by the cancellation of the £55 billion Building Schools for the Future programme - dropped 23 per cent.

The value of industrial starts on site rose 14 per cent year on year, while community and amenity rose 2 per cent.

Mr Wilen said: “A much diminished flow of government funding, particularly for education and social housing projects, reduced the overall level of construction starts in the three months to August.

“In addition, the growth in private housing starts has stalled, and positive growth from other parts of the private sector has been insufficient to make up for the lack of publicly funded project starts.”

While the nationwide picture looks bleak, Glenigan identified the East Midlands as the best performer regionally - the only region to experience double figure growth.

The East and North-west of England saw the largest falls in the value of project starts over the past three months.