Find out what’s happening in the property investment arena both in the UK and internationally
Residential housing brings the construction sector surging back to life
September 12, 2014Article by Charlotte Ashton
Earlier this year, the UK construction sector celebrated its fastest pace of growth for more than six years, according to figures from the Markit/CIPS purchasing managers’ index (PMI). Markit observed that residential house building was expanding particularly fast – at the start of 2014, the construction of residential accommodation in the UK increased at its fastest rate since 2003.
Supply and demand
Just this month, the sector has surprised economists with its resilience. The Markit/CIPS PMI recorded a surge to 64 in August, up from 62.4% in July (anything above 50 indicates growth). Economists had predicted a fall, but the sector instead grew at its fastest pace for seven months.
The sector has grown so fast, in fact, that supply problems have been recorded in some areas, with both materials and subcontractors running short. David Noble, group chief executive of the Chartered Institute of Purchasing & Supply, comments,
“The sector is struggling to find enough skilled tradesmen to keep pace with new work and the labour market will continue to put pressure on costs until the next wave of apprentices begin to enter the jobs market.”
A regional picture
While some areas struggle to balance supply and demand, others are revelling in the sector’s revival and in its future potential. In the West Midlands, for example, a survey by Irwin Mitchell of over 600 companies has found that 71% of construction firms are more optimistic about their future prospects than they were 12 months ago.
With a development of stunning, centrally located apartments in Birmingham, property investment specialists Property Frontiers have experienced the ups and downs of the UK’s construction sector over the past decade. Chief Executive Ray Withers explains,
“The construction sector is definitely on the up and, while commercial and financial construction is playing its part, the residential side is booming. The UK’s housing shortage is driving up demand and the sector is stepping up to meet that demand.”
Property Frontiers’ own offering in Birmingham has been designed to help alleviate the growing crowd of young professionals demanding long-term rental, city centre accommodation that fits with their vision of luxurious city living. Available for investment from £104,500, the buy-to-let apartments include studios and both one and two bedroom models. Expected yields are in the region of 7-8%, with underwrites available.
With some 80,000 new homes required over the coming years, the Birmingham skyline looks set to be dominated by cranes for quite some time, which, clearly is something for the construction sector to celebrate. At the Property Frontiers development – No. 1 Hagley Road – progress is certainly picking up pace. The inside of the building has been cleared and stripped and internal block work is already underway, with the mechanical and electrical packages to follow shortly. Completion is expected in 2015, with the development adding much-needed luxury apartments to Birmingham’s current accommodation offering.