Expectations
The Building Cost Information Service reported earlier this month that they are expecting to see a 1.2% fall in GDP, 2023 on 2022, and the rate of general inflation to fall 6.6% by the end of the year.
Whilst inflation remains at an all-time high, we have seen an increase in demand for Reinstatement Cost Assessments, as operational and running costs become a bigger priority for both landlords and tenants.
A 0.8% fall in material prices is expected. However, it is predicted that by December there will be an increase in interest rates of up to 4% with tender prices rising by 1.1%, according to the Building Cost Information Service.
Despite this, we believe the high demand for refurbishments, conversions, and repurposing project services will continue in line with a growing focus on sustainability.
A fall of 6.2% in new construction work output is anticipated where an ageing workforce, combined with both skilled and unskilled labour shortages, put a strain on the industry - in addition to an estimated 2.5% rise in building costs.
Where lead times, delivery, and budgets are affected by this, we anticipate a rise in demand for Project Management and effective contract administration to ensure projects are delivered on time and within budget.
Sector demands
Ahead of the Spring Budget on March 15th, it’s believed that the Government will view the capital investment as an area for growth. Any existing construction plans are also likely to be honoured.
However, there are a few factors that will affect private sector investments (housing in particular) including mortgage finance availability, falling prices, and the termination of the Help to Buy scheme.
The Office of Budget Responsibility are expecting prices to fall by 9%, along with a further blow of inflation and interest rates, contributing to the forecasted 18% decline in housing output this year.
Additionally, the Government are restructuring and considerably reducing their energy support packages, ultimately affecting construction supply inputs in the future.
Sustainability
The Government's Future Homes Standards has yet to consider the latest industry forecasts and how this could affect their 2025 target.
The BCIS have conjured two predictions regarding maintenance output this year. The first sees an increase in residential maintenance output, due to pressures on homeowners to install energy-saving measures.
In the past, the Government has attempted to introduce funding schemes to help the least energy-efficient homes in the country but to no avail.
The Government has once again pledged a new energy grant for these properties, but the success of this grant remains to be seen.
The second prediction sees the growth of commercial maintenance output restricted, mostly because of increased energy costs and stretched finances. This will become clearer as the year goes on.
Global factors
The ongoing war in Ukraine has seen a mass surge in energy prices across the country. Not only this but materials are also being sourced elsewhere, meaning prices are going up across the board to keep up with spending.
Additionally, an Inflation Reduction Act in the US could draw industry and investment away from the UK as it provides an attractive tax break and green subsidies package worth $500bn.
However, global supply chains could feel the negative effect of this when it comes to the supply of semiconductors, batteries, and key renewable inputs.
The Telegraph reported housing affordability in the UK has fallen to its lowest level in 150 years, with house prices now costing nine times more than the average salary, a statistic not seen since 1876. In London, this figure increases to 12 times the average person’s salary, meaning that private renting has become a more desirable option than homeowning.
Conclusion?
Along with economic and political uncertainty, 2023 has its fair share of challenges ahead. The BCIS recommends prioritising the most efficient ways of working to ensure project delivery is not impacted by inflation.
As 2023 continues to unravel, the construction/property industry should be prepared for changes in legislation, costs, and input.
How can we help?
Our team of Chartered Building Surveyors are working closely with property owners across London and the South Coast to proactively navigate a changing horizon. From ensuring new builds and conversions are delivered on time and in budget, to delivering EPC and MEES upgrades on behalf of landlords.
Read more about our solutions here:
- Technical due diligence
- Project management
- Dilapidations consulting
- Cost management
- Monitoring Surveying
- Party Wall
- Contract Administration
- Planned Preventative Maintenance
Alternatively, email us at enquiries@sillencehurn.co.uk or call our Southampton team on 02380 014786 or London at 020 3143 2128
