"The downturn in private housing project starts during the latter half of 2010 has continued into 2011 amid pessimism about the strength of the housing market, with the year-on year decline of 42% over the past three months greater than previously anticipated," said Glenigan economist James Abraham. "New social housing projects fell 36% over the three months to February as a result of government cut backs that are planned to increase over the next two years."
Social housing starts are set to remain under pressure over the coming months, Glenigan said. A return to growth in private housing starts is anticipated by the end of the year. However, poor household earnings growth and high unemployment, combined with limited mortgage availability and stalling house prices, will hamper the recovery.
In other construction sectors, non-residential project starts were down 7% year on year for the three months to February. This was also attributed to government funding cuts as well as heavy weather and the usual seasonal lull around Christmas. The underlying value of office starts fell by a fifth during the three months to February, and retail, industrial and hotel & leisure starts all declined by around 10%.
"Falling vacancy rates and rising rentals are expected to promote growth in the industrial and office sectors, especially during the second half of 2011," said Mr Abraham.
Civil engineering project starts were 2% down on a year ago as utilities project starts continue to decline while infrastructure starts stabilised over the three months to February. Increased investment by the regulated utilities is forecast to lift civil engineering starts over the longer term.
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