Residential housing faces slump amid broader construction stability

Residential construction in the UK continues to face challenges as Glenigan’s latest Construction Index reveals a 1% decline in project-starts during the three months to November 2024, compared to the preceding quarter. Year-on-year, the sector suffered a steeper 6% drop, highlighting ongoing struggles in the housing market.

Private housing, a traditionally robust performer, saw a 3% dip in activity against the previous quarter and a 1% fall on 2023 levels. Social housing offered a brief respite, with starts increasing by 4% from the prior three months. However, this was overshadowed by a sharp 20% year-on-year decline, reflecting systemic weaknesses in the sector.

Allan Wilen, Glenigan’s Economic Director, attributed these results to lagging policy impacts following the government change in July. “While residential construction starts have stumbled, brighter forecasts for 2025 offer hope for a turnaround. Meanwhile, non-residential construction is stabilising the broader market, driven by sectors like Education and Hotel & Leisure.”

Non-Residential Growth Offers Hope: The non-residential sector experienced strong growth, offsetting the residential sector’s struggles. Hotel & Leisure projects surged 37% over the previous quarter and a striking 71% year-on-year. Education projects also saw a boost, rising 31% quarter-on-quarter and 29% compared to 2023.

Despite these gains, some areas faltered. Industrial projects dropped 22% from the previous quarter and 4% year-on-year, while Community & Amenity project-starts fell 14% quarter-on-quarter and 15% on the year. Utilities starts endured a significant slump, with declines of 41% from the previous quarter and 34% year-on-year.

Regional Insights: Regionally, the North East stood out, posting a 32% quarter-on-quarter rise in project-starts. However, starts remained 20% lower than in 2023. London saw an 11% quarterly increase, managing a modest 2% year-on-year gain, while the South East rose by 3% against the previous quarter and 14% annually.

In contrast, Wales experienced sharp declines, with project-starts down 30% on the previous quarter and 34% year-on-year. Yorkshire & the Humber also recorded steep drops across all metrics.

As 2024 draws to a close, the data paints a complex picture of the UK construction industry. Residential housing struggles, but robust non-residential growth signals optimism for 2025, driven by renewed confidence in key sectors.