Growth in the construction industry has been boosted by booming property markets but doubts have emerged over long termability due to high energy prices and future prime ministerial changes, RICS has reported.
Growth in workloads slowed fractionally after increasing for three consecutive quarters. Workload growth is still high, well above year ago rates and the long run average of the survey, with 21% more Chartered Surveyors reporting a rise than a fall, down from 24% in Q2. The strongest activity was within commercial and private housing - both growing above their long run average for the fourth consecutive quarter. For the third consecutive quarter Scotland and Wales saw the fastest expansion in workloads.
Surveyors confidence in the future outlook for activity remains unchanged despite the August interest rate hike. A strong economy and booming housing and commercial property markets have boosted optimism. However, confidence in profit outlook over the next twelve months fell. High energy and raw material prices have taken their toll as surveyors report a pick up in the growth in costs of their main inputs. Feelings of instability over the leadership of the Government have been expressed by some respondents as Chartered Surveyors become nervous about Tony Blair’s exit strategy and it’s effect on the economy.
Skill shortages have eased due to the influx of migrant labour from Eastern and Central Europe with the number of Chartered Surveyors reporting shortages of trade persons falling to 29% from 36% in Q2, offsetting most of last quarters increase.
RICS chief economist Milan Khatri said:
“The immediate outlook for the construction industry is bright, as a healthy economic outlook continues to boost workloads. Interest rates are set to rise further and will cool the property market in 2007, as such we foresee a market slowdown in the construction industry. If the Government goes ahead with it’s proposals for Planning Gains Supplement there is a risk thatsmall developers will be driven out of the market andfirst-time buyers will feel the knock-on effect as the property market creates another brick wall.”
