New research by tax specialists, RIFT, has highlighted how a cooling housing market is likely to spell trouble for the UK construction sector, with a potential decline in employment levels on the cards for the first time since 2014.
All signs are currently pointing towards a slowing property market across the UK. The latest figures on the level of new homes reaching the market show that housing delivery is down by -2.6% across the UK when compared to the pre-pandemic market.
A look at homebuyer appetites shows that so far in 2023, buyers are snapping up just 43% of available stock on the market, down from 60% in 2022 and 63% in 2021.
Figures on mortgage approvals also support this downward trend where buyer activity is concerned, with the number of approvals already falling by 20% between 2021 and 2022.
This is partly due to the fact that, following September’s mini-budget, the number of higher loan-to-value products available to buyers was dramatically reduced. In fact, available mortgage products with an LTV of 85% or higher account for just 15% of all products currently available, meaning that buyers are having to stump up considerably higher deposits.
All of these factors combined have seen house prices start to fall in recent months, with Nationwide’s House Price Index showing that they have fallen on a month-to-month basis every month since September of last year.
But what does this mean for the construction industry? Well, a lack of appetite amongst buyers is sure to deter developers from bringing stock to market at a time when their profit margins are likely to take a hit. The knock-on effect of subdued housebuilder activity is, of course, fewer homes under construction and, therefore, less demand for those working within the construction industry.
As it stands, it’s thought that just over 1.391m people are currently employed across the UK construction sector. This is the highest total seen this side of the Millennium. However, while this total level of employment has seen consistent year-on-year growth since 2015, the rate of growth has also been slowing steadily and in 2021, remained flat (0%) versus the previous year.
With the wider housing market now also on the turn, it is likely that the number of those within the construction sector could be set to fall for the first time since 2014.
Bradley Post, CEO of RIFT, commented: “We’ve just witnessed an incredible period of boom where the UK housing market is concerned and this high demand from homebuyers has helped push the number of those working within the construction sector to its highest this Millennium.
"However, we have seen signs that this boom period is coming to an end, with employment growth across the sector stalling on an annual basis.
"With many indicators suggesting that the UK housing market is now starting to cool, we expect the nation’s big housebuilders to tread with more caution over the coming year and this will inevitably mean less demand for those working within the construction sector leading to a reduction in employment levels.
"While it is certainly not a long-term fix, those anticipating a reduction in work are advised to check they have been rightfully paid what they are owed, especially when it comes to the tax refund owed by HMRC for additional costs such as travel between sites, as well as food and board when doing so.
"Construction is one of the primary sectors that is often short-changed in that respect and those who haven’t claimed previously are able to backtrack these expenses over a four-year period."
