Is the building boom back?

16th April 2021

By Will Leyland

In cities across both the North West of England and the UK in general, one of the most prominent features in every city is the rapid rate in which new buildings are going up.

Cities such as Leeds, Liverpool and Manchester, part of the ‘Northern Powerhouse’, have experienced a noticeable boom in high quality housing and apartments being constructed as part of a wide ranging and fast paced regeneration.

During the pandemic, one of the hottest topics of conversation amongst economists and politicians was what state the economy would be in, how much would need to be borrowed, and how quickly the economy would be able to subsequently bounce.

Many expected that the return to normality and growth would be slow and painful, but there were also a bold few who argued that, thanks to the fact that the pandemic had paused demand rather than repressed it, the post-pandemic bounce would be pronounced and quick.

This, in turn, somewhat coined the term ‘coiled spring’ to describe the UK economy and those in the developed west.

As the name suggests, rather than a deflated balloon that would require time to re-inflate, the consistent rate of economic growth experienced has instead resulted in a quicker than anticipated build-up of pressure.

Whilst we don’t want to get caught up in tortured metaphors, another way to think of it would be a river that, rather than suffering from a lack of rainfall causing it to shrink, had a dam placed in front of it, allowing the water to trickle over the top until the wall was removed.

The economy and construction

The UK economy and construction aren’t completely separate entities and, to a large extent, the two are intertwined. If construction suffers, this is usually a strong indicator of lag in the wider economy.

Due to pandemic restrictions in 2020, construction slowed down markedly, however, there are now signs that things are picking up significant pace as we continue on the path back to normality.

As reported in the Guardian, “Britain’s construction sector has had its sharpest pick-up in activity since 2014 amid signs that the domestic economy is recovering more quickly than Brexit- and pandemic-affected trade flows, new figures have shown.

The latest snapshot of the construction sector, which accounts for around 6% of total UK output, pointed to an across-the-board increase in March.”

This was according to research released by the IHS Markit/CCips construction activity index. So what is this likely to mean for the wider property market?

UK property

Booming construction means a quickly growing economy, and a quickly growing economy indicates swiftly growing demand.

We already know that, thanks to dramatic price rises in 2020 in the property market, demand was high even throughout restrictions and a paused economy. If we can now safely assume that the economy is growing quicker than we thought, it’s fairly safe to assume that demand for property is following it.

We also know that demand for quality housing, apartments and new build living is high, with many indicating they’re looking to either stay in towns or cities or move into them.

That’s likely to mean that the recent trend of quickly rising property prices, yields and rents will continue, so it’s advisable to make the most of that by betting on UK property in 2021.

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Is the building boom back?

16 April 2021

In cities across both the North West of England and the UK in general, one of the most prominent features in every city is the rapid rate in which new buildings are going up.

Cities such as Leeds, Liverpool and Manchester, part of the ‘Northern Powerhouse’, have experienced a noticeable boom in high quality housing and apartments being constructed as part of a wide ranging and fast paced regeneration.

During the pandemic, one of the hottest topics of conversation amongst economists and politicians was what state the economy would be in, how much would need to be borrowed, and how quickly the economy would be able to subsequently bounce.

Many expected that the return to normality and growth would be slow and painful, but there were also a bold few who argued that, thanks to the fact that the pandemic had paused demand rather than repressed it, the post-pandemic bounce would be pronounced and quick.

This, in turn, somewhat coined the term ‘coiled spring’ to describe the UK economy and those in the developed west.

As the name suggests, rather than a deflated balloon that would require time to re-inflate, the consistent rate of economic growth experienced has instead resulted in a quicker than anticipated build-up of pressure.

Whilst we don’t want to get caught up in tortured metaphors, another way to think of it would be a river that, rather than suffering from a lack of rainfall causing it to shrink, had a dam placed in front of it, allowing the water to trickle over the top until the wall was removed.

The economy and construction

The UK economy and construction aren’t completely separate entities and, to a large extent, the two are intertwined. If construction suffers, this is usually a strong indicator of lag in the wider economy.

Due to pandemic restrictions in 2020, construction slowed down markedly, however, there are now signs that things are picking up significant pace as we continue on the path back to normality.

As reported in the Guardian, “Britain’s construction sector has had its sharpest pick-up in activity since 2014 amid signs that the domestic economy is recovering more quickly than Brexit- and pandemic-affected trade flows, new figures have shown.

The latest snapshot of the construction sector, which accounts for around 6% of total UK output, pointed to an across-the-board increase in March.”

This was according to research released by the IHS Markit/CCips construction activity index. So what is this likely to mean for the wider property market?

UK property

Booming construction means a quickly growing economy, and a quickly growing economy indicates swiftly growing demand.

We already know that, thanks to dramatic price rises in 2020 in the property market, demand was high even throughout restrictions and a paused economy. If we can now safely assume that the economy is growing quicker than we thought, it’s fairly safe to assume that demand for property is following it.

We also know that demand for quality housing, apartments and new build living is high, with many indicating they’re looking to either stay in towns or cities or move into them.

That’s likely to mean that the recent trend of quickly rising property prices, yields and rents will continue, so it’s advisable to make the most of that by betting on UK property in 2021.

Will Leyland

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