Good news on the horizon for new private housing construction?

Falling prices suggest imminent boost in demand and sales for construction and KBB.

In our last article, we reported on the ONS (Office for National Statistics) monthly bulletin for January, which showed a small decline in construction output for the month – and although that might have seemed gloomy at first glance, we concluded that there were grounds for cautious optimism.

Again, we have some news that will be music to the ears of the kitchens, bedrooms and bathrooms sector in particular. According to Chris Frankland’s piece on KBB Review (kbbreview.com 1^st March 2023), house prices are increasing at their lowest rate since 2012. Why is that good news? you might well ask. The answer is simply because lower prices make houses more affordable – so market experts are already forecasting increased house sales – with the obvious consequence of increased demand for kitchens, bedrooms and bathrooms. This is far from empty conjecture. The figures – from the most credible of sources, the Nationwide House Price Index – indicate that overall house prices dropped by 1% in February compared to February 2022, the first time they have actually fallen since June 2020. 

Nationwide’s chief economist Robert Gardener is quoted in the piece as saying, “The recent run of weak house price data began with the financial market turbulence in response to the mini-Budget at the end of September last year. While financial market conditions normalised some time ago, housing market activity has remained subdued.

“Even though consumer sentiment has improved in recent months, it is still languishing at levels prevailing during the depths of the financial crisis. However, conditions should gradually improve if inflation moderates in the coming months as expected.”

While some experts are suggesting we may see houses decrease in value by as much as 8% for the year, this is a long way from the property market crash that some of us feared. Indeed, it puts prices roughly back where they were in 2021 – not a disastrous prospect and actually one that will be welcomed by prospective buyers who have been priced out of the market completely by a dizzying 20% (£50,000) rise in the price of the average house.

This, then, is good news for the Private Housing sector of the construction industry because lower prices bring people back to the market, increasing the demand for new builds. As Jack Roberts, SlothMove CEO comments in the KBB Review article, 

“Many first-time buyers will see it as their window of opportunity, giving them a limited time to swoop before the market rights itself. Their biggest hurdle, as ever, will be the affordability gap, but with rents increasing and borrowing levels relatively settled, it could be their moment.”

For the KKB sector in particular, this “re-adjustment” of the market represents even better news as demand for kitchens, bedrooms and bathrooms is certain to grow in tandem with the market for new housing – with the added bonus of a rejuvenated replacement market generated by pent-up demand from previously frustrated house-movers.