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Housebuilding Market Report 2003
Key Note Publications Ltd, June 2003
In 2002, the UK housebuilding market produced a total output worth £31.24bn, accounting for 37.4% of the total output of the construction industry as a whole. Strong growth was recorded at 12.2% between 2001 and 2002. Not only is the UK's housebuilding market vital to those that it employs and the ancillary industries that supply it, it is also of major importance to British home buyers, who see their home as a key investment.
The housebuilding market comprises four distinct sectors: the public sector the private sector and, within each, a new work sector and a repair, maintenance and improvement (RMI) sector. Private sector new work and private sector RMI have registered the largest increases in output since 1997, although public sector new work has also seen significant gains following the transfer of public sector housing stock to housing associations.
A number of economic factors have converged to produce very rapid, high growth in the private housing sector. Low levels of unemployment, an undersupply of housing, low interest rates and poor returns on savings, stocks and shares are fuelling demand for housing, both new and secondhand. Housing associations, which operate in the public sector, have also been developing additional public sector housing and maximising the opportunity to borrow money at low interest rates in order to fund developments.
Although growth in the private new work sector has been strong in terms of output, the actual level of housing completions is too low to meet demand. This sector is highly constrained by a lack of suitable land for residential building. The private RMI market has also benefited from the housing boom, both by sellers renovating properties prior to sale and buyers putting their stamp on their new homes. The public sector has benefited from the new build initiatives of many housing associations, but the RMI sector has also been benefiting from a government programme to renovate council housing.
There are concerns that the housing market has reached capacity and that house prices in certain regions will fall. This is most likely to occur in the regions where the price rises have been most dramatic. On the whole, if interest rates continue to remain low, prospects for the housebuilding market should remain positive over the coming years.
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