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London house prices start to stabilise after three-year dip

Signs that London’s house prices could be starting to stabilise emerged this morning, with a new study showing that values picked up slightly in February.

According to Zoopla, househunters that have previously held off on deals are seeking out buying opportunities in the capital following weaker house price growth amid the Brexit uncertainty.

The property portal said that “while market conditions remain weak, there are signs of a pick-up in demand following a 3-year house price re-correction of London homes”.

The rate of London’s annual house price growth picked up modestly in February, climbing 0.4 per cent when compared with the same month in the previous year.

The number of London postcodes registering a fall in house prices also dipped from 69 per cent in October to 55 per cent in February.

Every city in the UK registered a rise in house prices in February for the first time since 2015.

The city which saw the sharpest year-on-year rise in house prices was Leicester, which registered a 6.8 per cent bump in values over the 12 months.

Richard Donnell, research and insight director at Zoopla, said that there was a “greater realism on pricing by sellers”.

Donnell added: “With unemployment at a record low and mortgage rates still averaging two per cent, buyers appear to be largely shrugging off Brexit uncertainty until there is a material change in the overall outlook.”

Yet today’s figures come despite a swathe of recent data showing that activity in the capital’s housing market has largely continued its downward trajectory in recent months.

House price rises in January fell to 1.7 per cent across the UK, according to recent Office for National Statistics (ONS) data, with London recording the lowest annual growth out of any region.

The Royal Institution of Chartered Surveyors (Rics) also warned recently that uncertainty over Britain’s imminent departure of the EU is likely to damage the UK housing market over the coming months.

By Sebastian McCarthy

Source: City AM

Buy-to-let best yielding
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Best Yielding UK Buy To Let Property Investment Postcodes

The best yielding buy to let property investments are the utopia every investor looks for, and research by sales and letting agent Benham and Reeves highlights the best spots.

Being a London agent, Benham and Reeves have obviously included the capital when searching for the best buy to let areas for rental returns, but the north can offer better yielding places.

Top on the list came Liverpool’s L7 postcode. With an average price of just £105,000, the area offers an average rental yield of 10.7 per cent.

This was closely followed by the neighbouring L6 postcode where yields are currently 10.4 per cent. Middlesbrough, Manchester, Bradford, Sunderland, Newcastle, Sheffield and Nottingham were also home to some of the highest yielding postcodes.

When it came to the capital, the agent found the highest yielding postcode to be the E6 postcode in East London, along with IG11, which covers Barking. Both locations offer a rental yield of 5 per cent.

East London dominated the top 10 highest returns for buy to let postcodes, with Romford postcodes RM8, RM9 and RM10 also amongst the best with rental yields of 4.9 per cent.

With E15 and EN3 also in the top ten highest yielding London postcodes, N18, which straddles the North Circular, is one of the only postcodes outside of East London to make the list with a rental yield of 4.8 per cent, while SE28 was the only postcode south of the river to appear.

Unsurprisingly, director of Benham and Reeves, Marc von Grundherr, concentrated on the capital, saying: ‘The DNA of the London rental market is so complex that it pays to consider where to invest on the most granular level possible when looking at the buy to let market.

‘Of course, London’s more prime postcodes are always a safe bet, attracting investment due to their prestigious image and positioning. While we may have seen some decline in price growth due to political uncertainty, they remain very much in demand from a rental point of view and so far, those with the budget to buy there, a return isn’t hard to come by.’

He concluded: “They also offer better capital growth than London’s peripherals and for those not completely dependent on yield but preferring to opt for more long-term growth, inner London is still the go-to place to invest in the capital’s buy to let market.’

Source: Residential Landlord

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House prices up 2.8% over the last year

Leicester and Manchester have recorded price growth of 17% since the Brexit vote in June 2016, followed by a 16% increase in Birmingham, Zoopla’s UK Cities House Price Index has found.

The index, powered by Hometrack, found prices have been rising by 5% or more in seven cities led by Leicester, Manchester and Glasgow.

Andy Soloman, founder and chief executive of market researcher Yomdel, has found: “Extremely positive to see the larger, economic hubs of the UK all clock up some positive mileage so early in the year where price growth is concerned.

“I think we’ve now seen a shift in mentality amongst both buyers and sellers who realise if they do wish to sit on the fence until Brexit is finalised, they could be there quite some time.

“As a result and much like Brexit, people just want to get on with it now and sellers are adjusting their price expectations in line with the current market climate, while buyers are taking the plunge and proceeding with a purchase.

“This uplift in demand and market activity has stimulated the market and provided the first concrete signs of a pulse after running on life support for quite some time.”

This is the first time annual price growth has been positive across all 20 cities for 3.5 years, since August 2015, primarily a result of growth finally turning positive in Aberdeen.

Average house prices increased by 2.8% over the last year,Annual price inflation ranges between +6.8% in Leicester to +0.2% in Cambridge.

The annual rate of growth in London has increased slightly to +0.4%. While market conditions remain weak, there are signs of a pick-up in demand following a 3-year repricing of London homes.

This repricing process has come in two forms, absolute price falls which have been concentrated in higher value markets, and a widening in the discount between asking and achieved prices, with the largest discounts in inner London.

Our granular house price indices for London reveal that the proportion of postcodes registering price falls is starting to reduce.

The latest data reveals that prices are falling across 55% of London postcodes, down from almost 70% last October.

The rate at which prices are falling in these markets is relatively low – 0% to -5%. Prices continue to increase in 45% of London City postcodes, typically lower value, more affordable areas in outer London.

Buyers who have delayed purchases and stood on the side-lines since 2015, are starting to see greater value for money, perhaps seeking out buying opportunities while Brexit uncertainty impacts market sentiment.

While London has registered weak growth, regional cities outside southern England have recorded above average price inflation over the last three years. This is a result of better affordability and rising employment which has boosted demand.

The rate of price inflation in regional cities has started to moderate. Hometrack prediction this will continue over the remainder of 2019 and Birmingham and Manchester to start to lose momentum.

Its granular price indices for Birmingham and Manchester, found a significant increase in the proportion of postcodes registering growth of 0% to 5% and fewer areas recording growth over 5% per annum.

This is a result of growing affordability pressures as well as increased uncertainty. We expect prices to keep rising in these cities but at a slower rate, closer to earnings growth.

This follows the pattern recorded in cities such as Bristol and Bournemouth in southern England.

Brexit uncertainty is often cited as the cause of weaker house price growth over the last 12-18 months. Hometrack said it is more complex than that and sees Brexit uncertainty as a compounding factor in markets where fundamentals have weakened.

Price growth is just one measure of relative market strength. Levels of housing transactions are another important measure for businesses operating in the market. The willingness and ability of households to move home underpins revenues and business plans.

Data on transactions remains resilient with no obvious Brexit impact at a national level. Transaction volumes over 2018 remained in line with the 5-year average. The same is true for mortgage approvals for home purchase.

There has been no material drop in activity over 2018H2 as the Brexit debate has heated up. The very latest data from HMRC showed that housing transactions have increased slightly in the first two months of 2019.

With unemployment at a record low and mortgage rates still averaging 2%, buyers appear to be largely shrugging off Brexit uncertainty until there is a material.

By Michael Lloyd

Source: Mortgage Introducer

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The British Pound is a Buy says Morgan Stanley

The Pound remains the best performing currency in the G10 universe for 2019 but the British currency has much further to rise, according to analysts at Morgan Stanley, who’ve recently told clients to buy the British currency.

Morgan Stanley forecasts double digit upside from Thursday’s level for the Pound-to-Dollar rate before the year is out and around a 3% increase for the Pound-to-Euro rate, the latter of which has already risen 5.4% thus far in 2019.

Analysts at the bank also advocated that clients buy the Pound-to-Dollar rate earlier in March, as they themselves are targeting a move up to 1.3650, although their year-end forecast for that exchange rate is much higher.

Expected changes in relative interest rates are key to much of the projected increase but the anticipated shift in base rates and bond yields could not happen without a resolution of the Brexit saga that’s ongoing in the UK parliament.

“This week’s Brexit news affirms our view that the probability of a softer Brexit is continuing to rise, particularly a Brexit that includes tighter economic linkages to the EU. Meanwhile the risks of a hawkish BoE remain underpriced – wage growth continues to rise in the UK while capacity pressures bite, suggesting potential inflation pressures,” says Hans Redeker, head of FX strategy.

Significant numbers of MPs have indicated they will now back Prime Minister Theresa May’s EU Withdrawal Agreement for fear of losing sight of the exit door entirely, including former foreign secretary Boris Johnson and at least 25 others.

Those pledges of support came after PM May offered to resign once her signature bill is through the House of Commons. However, a large number of MPs still oppose it and the Democratic Unionist Party (DUP) of Northern Ireland is so-far unmoved in its opposition to the treaty.

The withdrawal agreement will set the stage for negotiations on the future relationship so a change of Prime Minister would not address its deficiencies If it is not passed this week the UK will receive from the EU an Article 50 extension that runs only until April 12.

At that point MPs will choose between a so-called no deal Brexit and a much longer extension that would require participation in EU elections while politicians establish a way forward. PM May has said she will not allow a “no deal” exit unless parliament consents to it, but MPs voted on Wednesday with a majority  of 240 to reject that idea.

“The announcement of a proposed Brexit extension raises the risk of a public vote to ultimately solve Brexit, which may add some short-term risk premium and uncertainty into the currency. However, the long-term probability of a softer Brexit outcome is, as a result, rising, making GBP longs still attractive in our view,” Redeker says.

This will give the Bank of England (BoE) an opportunity to lift its interest rate again, by eliminating the risk of a “no deal Brexit”, which has long been seen as the difference between whether the BoE hikes or cuts its rate next.

The trade tariffs and non-tariff barriers on bilateral trade that would come with a “no deal Brexit” could potentially undermine the outlook for inflation by reducing demand in the economy. As a result, the BoE has been reluctant to make any changes to interest rates before it knows exactly how the Brexit saga will end.

The Bank of England has raised its interest rate by 25 basis points on two occasions since the referendum in 2016, taking the Bank Rate up to 0.75%, it highest level since before the global financial crisis.

But the central bank has said repeatedly in recent months that elevated inflation and a robust outlook for consumer price pressures mean it’ll need to keep raising rates in the coming quarters.

“GBP is most highly correlated to local rates and rate differentials, suggesting that a hawkish shift [at the Bank of England] should propel GBP higher. A key risk to the trade is that UK economic data softens, reducing the probability that the BoE raises rates,” Redeker says, in a note to clients.

Interest rate changes influence exchange rates through their impact on the attractiveness of related investments, particularly those in the bond market. They do that by reducing, or widening already-negative, interest rate differentials.

International capital tends to flow wherever relative interest returns are most favourable so if the gap between two interest rates moves in favour of one currency that is on one side of an exchange rate, that currency will normally be rewarded with a bid from the market.

The U.S. Federal Funds rate of 2.5% is substantially higher than the BoE’s 0.75% but markets are already speculating the Federal Reserve could cut its interest rate next year so if the BoE were to lift Bank Rate the Pound-to-Dollar rate differential would move in favour of Sterling.

It is a gradual increase in market bets on BoE rate hikes that Redeker says will drive the Pound-to-Dollar rate up to Morgan Stanley’s forecast of 1.52 by year-end, from 1.32 on Thursday, which implies an increase of 15% to come on top of the 3.5% gain already under the exchange rate’s belt.

The Pound-to-Euro rate is forecast to rise by almost 3% to just below the 1.22 level, from 1.1720 Thursday. The lesser increase in that exchange rate owes itself to the fact the Euro-to-Dollar rate is also projected to rise substantially, to 1.25, from 1.1250 Thursday.

By James Skinner

Source: Pound Sterling Live

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More than a million homes could be built on brownfield land – campaigners

More than a million homes could be built on brownfield land, helping to meet housing demand and regenerate towns and cities, campaigners say.

A new analysis of councils’ brownfield land registers by the Campaign to Protect Rural England (CPRE) suggests there is space for a million homes on suitable sites which were previously built on and now sit derelict or vacant.

Two-thirds of the potential new homes are on sites which are “shovel ready” and are deliverable within five years, so they could make an immediate contribution to meeting housing need, the analysis suggests.

CPRE argues that prioritising the brownfield land which councils have shown is suitable for development will provide more homes and transform run-down areas.

And it will prevent the unnecessary loss of countryside and greenfield sites for housing, the campaign group said.

With more than 120,000 potential new homes added to the registers across England in the last year alone, brownfield land could continue to provide a steady pipeline of new housing, CPRE said.

Building on brownfield land presents a fantastic opportunity to simultaneously remove local eyesores and breathe new life into areas crying out for regeneration

Rebecca Pullinger, CPRE

But it warned that the definition of the land available for residential development for the registers may be missing opportunities to make better use of existing developed sites – meaning more homes could be provided.

And the assumptions for the density of housing on a site are low, so that increasing the number of properties built on brownfield could help councils make the best use of the space and deliver more homes, the charity said.

The analysis shows 18,277 sites identified across the country with 1,077,292 potential new homes – of which 634,750 homes are deliverable within five years.

London, Manchester, Birmingham, Leeds and Sheffield have identified suitable previously-developed land which could provide almost half a million homes.

CPRE is calling for the Government to introduce a genuine “brownfield first” policy which ensures suitable previously-developed or under-used land is prioritised for housing over green spaces and countryside.

And clearer definitions and guidelines are needed for the registers to be a better pipeline of sites, identifying all brownfield areas and recording their suitability for uses other than housing, including protecting their wildlife or heritage value where appropriate, it urged.

Rebecca Pullinger, planning campaigner at CPRE, said: “Building on brownfield land presents a fantastic opportunity to simultaneously remove local eyesores and breathe new life into areas crying out for regeneration.

“It will help to limit the amount of countryside lost to development, and build more homes in areas where people want to live, with infrastructure, amenities and services already in place.”

She added: “Councils have worked hard to identify space suitable for more than one million new homes.

“But until we have a brownfield first approach to development, and all types of previously developed land are considered, a large number of sites that could be transformed into desperately needed new homes will continue to be overlooked.

“The Government, local councils and house builders must work hard to bring these sites forward for development and get building.”

Housing Minister Kit Malthouse said: “This Government is committed to building the homes our country needs while still leaving the environment in a better state than we found it.

“We’re encouraging planners to prioritise building on brownfield land and working with local authorities to ensure sensible decisions are made on where homes get built.”

Source: iTV

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Investing in student property doesn’t stack up

Don’t be fooled by the attractive yields from investing in student property: the market doesn’t live up to the hype.

Type “invest in student accommodation” into Google and the search results seem compelling. Advertisements claim that in return for a relatively modest sum you can achieve guaranteed returns of anything from 7%-10% a year on a fully tenanted, fully managed buy-to-let investment. But investors should do their homework before parting with their money. Behind the glossy advertisements for purpose-built student accommodation lie high-risk, illiquid investments.

The student “pods” advertised to “savvy” investors are usually top-end, en-suite studios in buildings offering residents services such as high-speed broadband, gyms, cafes, and cycle storage. Buildings tend to be in city-centre locations with units appearing cheap compared with other properties in the same area. But the first problem investors might encounter if they want to buy one is that most mortgage lenders won’t lend on pods. “If a bank doesn’t think it’s a safe bet, then you should stay well clear,” says Robert Bence of the Property Hub forum. “The reason they won’t lend is that if they had to repossess a student pod they wouldn’t be able to sell it.”

Rental guarantees may sound reassuring, but they’re not

Assuming you can muster the cash to buy a student property outright, the rental guarantees offered by developers might sound reassuring – and lucrative: studentproperty.org offers returns of up to 10% fixed for up to five years; Urbane Brix advertises average annual yields of 9%; Sterling Woodrow mentions 10% assured income for three or more years. But if these yields sound too good to be true, it’s because they often are. Once the guaranteed period has expired, investors often find the real market rate for rents is much lower than they were initially told. In other cases the guaranteed rents and returns fail to materialise or last as long as they should.

“A quick bit of research will show you that many pods are advertised at a rent much higher than what the market dictates and that’s because the guaranteed rent is baked into the price you pay,” says Bence. Management charges are another factor to take into account. Unfortunately, managing agents of blocks of flats have a reputation for overcharging and under-delivering.

Assuming none of this puts you off and you buy a student unit, you could then run into problems if you want to sell later on. With a traditional buy-to-let property you can sell to the whole of the market. But your options are much more limited if you want to sell a student pod: you’ll need to find another cash-rich investor. The lack of exit options also affect pods’ prospects for capital growth.

Student property is high-performing, but only for some

If student units are such a risky investment, why is this type of accommodation often described as one of the best-performing asset classes? These claims often fail to mention that they’re talking about institutional investment, where pension funds and similar institutions buy whole blocks of units, or lease buildings from a university. They have a lot more control over their investment, enough capital to survive void periods or rent arrears, and an exit strategy that involves selling the block as a whole. The risks to individual investors buying single units are much higher. Especially keen investors might be better off researching the specialist trusts in the sector, such as Empiric Student Property (LSE: ESP), GCP Student Living (LSE: DIGS) or Unite Group (LSE: UTG).

By: Emma Lunn

Source: Money Week

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No-deal Brexit could lead to transfer values being cut

Leaving the European Union without a deal could lead trustees to cut transfer values to protect defined benefit pension schemes, experts have warned.

Malcolm McLean, senior consultant at Barnet Waddingham, told FTAdviser recent estimates had correctly predicted a no-deal Brexit would increase pension deficits by billions of pounds.

This in turn could have an adverse effect on transfer values, he suggested.

He said: “Crashing out of the EU without any sort of deal would almost certainly increase market volatility and continued uncertainty as to the future direction of travel for the economy as a whole.

“This could impact on gilt yields and inflation expectations, all of which could have a damaging effect on DB funding levels and transfer value rates.

“In a more extreme scenario, trustees could be forced to cut transfer values in the interests of protecting the fund and holding on to the employer covenant.”

According to analysis from Colombia Threadneedle, UK DB schemes would see their deficit increase by £35bn if the UK leaves the EU without an agreement.

This is because while UK DB funds’ assets would rise in a no-deal scenario, as they are invested overwhelmingly in non-domestic assets, liabilities would increase even further.

If, on the other hand, the government agreed to a softer Brexit, schemes could be in line for a £85bn surplus, as liabilities wouldn’t rise as much.

Mr McLean said a softer Brexit “would bring a degree of certainty to the proceedings, something that markets always like to hear”.

He added: “Whether that would in itself materially affect DB fund holdings and ultimately increase transfer values is not absolutely certain, but it could enable a return to the more stable conditions we have seen in this respect previously.”

Counterbalancing this theory is the possible impact of a no-deal on interest rates.

Sir Steve Webb, former pensions minister and director of policy at Royal London, explained that if the Bank of England felt it needed to cut interest rates again to prop up the economy, then this could also affect long-term interest rates, which could drive up transfer values.

He said: “But the impact on the stock market would also be important. If shares also fell then this could also increase deficits, especially for less mature DB schemes.”

Kay Ingram, director of public policy at national firm LEBC, also believes that transfer values generally would rise in the immediate aftermath of no-deal, due to a weaker sterling combined with low bond yields.

She said: “Schemes with assets invested primarily in global equities would benefit from the continued sterling weakness.

“Using this investment dividend to offload future growing liabilities would make sense for schemes with this asset allocation.

“Those schemes with a reliance on UK fixed interest and domestic stocks would see deficits widen but could benefit if the Bank of England responded to this scenario with interest rate cuts and reintroduction of asset purchases.”

But Ian Neale, director at pensions specialist Aries Insight, cautioned against generalising across all DB schemes.

Mr Neale noted that market factors, including possible tariffs, the proportion of scheme investments dependent on the UK economy, and the business sector in which the scheme sponsor operates will be material for the impact of Brexit for pension schemes.

He said: “The general feeling in the industry seems to be that if UK exit does happen, then it is more likely to depress than enhance scheme valuations.”

By Maria Espadinha

Source: FT Adviser

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Expert Panel Unanimous on Future Optimism in UK Housing Market

A panel of experts were unanimous in their belief that there are grounds for optimism in the UK housing market over the next five years, at an opening debate for the Landlord Investment Show 2019 in London Olympia.

The Landlord Investment Show 2019 kicked off at Olympia London on March 21st, commencing with a government panel debate hosted by publisher and broadcaster Andrew Neil. The debate ranged over a wide variety of pertinent topics, such as Brexit and housebuilding, as well as the obstacles homeowners and landlords currently face.

The panel’s three expert panellists were unanimous in voicing optimism for the UK housing market over the next five years, with some of them believing market fundamentals to be strong and supportive, despite apparent political uncertainty in the present.

The panel consisted of four guest speakers, including Iain Duncan Smith MP; Sarah Davidson, knowledge and product editor of This is Money; Paul Mahoney, founder and managing director of Nova Financial Group, as well as Tony Gimple, founder of Less Tax 4 Landlords.

Mr Duncan Smith, former leader of the Conservative party, used the debate as an opportunity to voice his concern about housing policies implemented in recent years. He believed former Chancellor of the Exchequer George Osborne’s economic policies “had led to landlords scaling back or even leaving the sector entirely”.

Strong turnout at Olympia

As many as 4,300 guests attended the National Landlord Investment Show in Olympia last week. Following the positive verdict on future sentiment in the housing market from the guest panellists at the opening debate, attendees were invited to a variety of seminars, including a special Brexit seminar.

The subject of Brexit was no doubt at the forefront of the minds of many attendees, especially following the developments of preceding days in Westminster. However, Brexit was not the only topic for people to talk about at this year’s event.

Attendees were also invited to attend seminars on the subject of opportunities and threats in the property market for the year ahead, as well as a legal debate chaired by Paul Shamplina, founder and director of Landlord Action. The legal debate centred on topics of great interest to the audience, including the subject of buy-to-let, as well as the private rental sector.

Opportunities for forging new connections

For budding investors keen for some further insights on the subject of buy-to-let, there was a seminar on the subject of being a beginner in property, hosted by a representative from the Property Investors Network.

Buy-to-let proved to be a topic with much coverage during the day, with talks including a morning seminar on the subject of buy to let property investment fundamentals, mistakes and changes, by Paul Mahoney, as well as an educational seminar on how to finance buy-to-let property, held by Jeni Browne, Sales Director at Mortgages for Business.

There were as many as 88 stands erected at the venue for the occasion, giving plenty of opportunities for guests to delve into intriguing ventures and make new connections. Despite the recognition of an overall slowdown in the housing market in the first few months of 2019, National London Investment Show at Olympia was a hive of activity, with attendees showing great keenness to explore new opportunities for the year ahead.

Source: Property118

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Nearly 60% of landlords saw tax bills rise

Nearly six out of 10 landlords (58%) saw an increase in their 2017-18 tax bill, Paragon’s PRS Trends Report for Q1 2019 has found.

Landlords with three or more properties were more likely to report an increase in their 2017-18 tax bill than those with smaller portfolios, with an average annual increase in tax of £3,039 for those reporting a rise.

While over 60% of landlords confirmed that the change in their 2017-18 tax bill was as expected, one third (33%) said it was either a little or a lot more than expected.

John Heron, director of mortgages at Paragon said: “These figures provide early insight into how the tax changes impacted landlords in the first year of implementation.

“The January tax deadline was the first real data point for measuring change and it’s clear that landlords are continuing to adapt their approach as the transition progresses.

“The fact that almost one quarter of landlords intend to respond by selling property is bad news for tenants, impacting supply to the sector, driving rental inflation and ultimately making it more difficult for those that rely on the UK’s Private Rented Sector for a home.”

Almost half of landlords (49%) who reported a higher than expected increase said they would make changes to their portfolio as a result, with the most popular measures including selling property (24%), increasing rent (20%) and reducing borrowing (19%).

Mortgage interest tax relief for buy-to-let landlords is being phased out over a four-year period and replaced with a basic rate tax credit.

In the 2017-18 tax year, landlords could deduct 75% of mortgage interest costs from rent. This was reduced to 50% in 2018-19. It will fall to 25% in 2019-20 and then to zero.

By Michael Lloyd

Source: Mortgage Introducer

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Is ‘No Deal’ the Best Deal for UK Construction?

According to a recent report by www.designingbuildings.co.uk just 15% of construction executives favoured a UK exit from the European Union (EU).

In recent times the Bank of England declared a no-deal Brexit could wipe 8% off the UK’s GDP this year – a bigger hit than the financial crisis – potentially taking 30% off house prices, according to a report in www.building.co.uk.

And yet with the prospect of the UK potentially pulling out of the EU with a No Deal Brexit, there are clearly vital potential issues about to affect thousands of businesses around the country – from a lack of clear guidance on regulations, to a shortage of skills, and a potential lack of access to building materials.

One obvious major concern is the ‘divorce’ could potentially result in a lack of free movement which Prime Minister Theresa May is adamant should take place.

Surely this means the skills shortage could worsen and the UK could become a victim of higher development costs whereby labour demand outstrips supply?

Figures from the Office for National Statistics indicate that one-third of workers on construction sites in London are from overseas, with around 28% coming from the EU. This calls into question the range of skills this one-third has acquired given that construction sites need a combination of skillsets to complete work from engineering to bricklaying.

On the one hand the knock on effect of a lack of free movement could result in the decline in the number of houses being built resulting in construction firms failing to meet the government’s housing target thus deepening the crisis of a lack of housing in large cities.

On the other hand, if investors pull out of the UK, house prices could drop – leaving more empty properties available on the market. Either way, it’s difficult for construction firms to know what to prepare for as Britain meanders its way through unknown territory.

A 2010 study by the Department of Business Skills and Innovation estimated that 64% of building materials were imported by the EU. The same report estimated that 63% of building materials were exported to the EU. After Brexit, importers and exporters may face duties or limits on quantities, which could in turn result in an increase in costs, or a shortage of, construction materials.

Brian Berry, Chief Executive of the Federation of Master Builders, says in a recent press release:

‘The single biggest issue keeping construction employers awake at night is the skills shortage. If we’re going to address this skills gap post-Brexit, the whole industry needs to step up and expand their training initiatives. Even Sole Traders can offer short term work experience placements and large companies should be aiming to ensure at least 5 per cent of their workforce are trainees or apprentices.

‘But realistically speaking, the UK construction sector can’t satisfy its thirst for skilled labour via domestic workers alone. With record low levels of unemployment, we’ll always need a significant number of migrant workers too – particularly in London and the south east.

‘The Government needs to work with construction to amend its Immigration White Paper and rethink the current definition of low-skilled workers. Level 2 tradespeople play a vital role in the sector and would currently be excluded, which is wrong. We urge Ministers to engage with the construction industry to help improve these proposals.’

The Construction Industry Training Board – www.citb.co.uk, – however, expects positive growth for the construction industry but only in the case of an exit deal as opposed to a no exit deal, according to the CITB’s recent press release.

The annual Construction Skills Network (CSN) report – a five-year forecast into the industry’s skills needs – anticipates construction growth of 1.3% across the UK, down a third of a percent on the previous year. The forecast is based on the scenario that the UK agrees an exit deal with the EU, rather than a ‘No Deal’ situation.

The biggest increase is expected in public housing, which is pulling ahead as infrastructure slows. Financial support from Government at both local and national levels is encouraging a 3.2% growth rate in public housing, up half a percent since last year’s forecast.

Infrastructure is set to grow by 1.9%, down from 3.1% predicted in last year’s forecast. The sector has been heavily affected by Brexit uncertainty and by investors stalling construction of the Welsh nuclear power plant Wylfa in January.

Commercial construction is significantly declining due to investors taking a cautious stance in the face of Brexit. The forecast expects the sector to drop sharply this year then level out by 2023, with zero growth anticipated overall.

However, the housing repair and maintenance sector appears to be benefitting from a quieter property market as home owners halt plans to sell up and instead focus on improving their current properties. By 2023, the sector is expected to have grown by 1.7%.

Despite the wider economic uncertainty, more construction workers will be needed over the next five years. An approximate 168,500 construction jobs are to be created in the UK over the next five years, 10,000 more than in last year’s forecast. Construction employment is expected to reach 2.79 million in 2023, just 2% lower than its peak in 2008.

Steve Radley, Policy Director at CITB, said:

‘This forecast aptly reflects the uncertainty, particularly associated with Brexit that we’re seeing across the wider economy. Currently, concerns around Brexit are weighing on clients and investors, creating a knock-on effect on contractors and their ability to plan ahead.

However, assuming that a deal is agreed, we expect low but positive growth for construction.  Even as infrastructure slows, sectors like public housing and R&M are strengthening. This will see the number of construction jobs increase over the next five years, creating growing opportunities for careers in construction and increasing the importance of tackling the skills pressures we face,”

Whether one prefers the notion of a road to opportunity or the wake-up call of a No Deal Brexit, the clock is ticking for the UK’s construction executives as the sector waits for clarity from the UK Government.

By MARK POWNEY

Source: Busubess Bewa Wales