News

Property sector confidence holds steady as profit growth remains high

Business confidence amongst property businesses has held high for the second quarter running, according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM).  An encouraging sign for recovery in the property market.

Key findings for Q1 2014 show:

  • The BCM Confidence Index for UK business as a whole stands at +37.2, up from +31.7 in Q4 2013, a new record high
  • Comparably, the BCM Confidence Index for property stands at +43, a near steady marker from +44 in Q4 2013. This indicates the sector is maintaining high levels of confidence for the year ahead, suggesting finance professionals in the sector continue to be encouraged that the worst may be over for the sector
  • The UK economy is forecast to grow by 1.5% in Q1 2014
  • Businesses overall report the fastest investment growth since 2008, but growth in exports is expected to fall back – a concern due to the current trade deficit

Despite surging confidence in the sector in the last six months there is some caution regarding expected growth for the year ahead. Capital investment is expected to rise, indicating the sector is looking to focus on stabilisation after a rocky recovery. And property businesses anticipate modest growth, both in exports and profit, in the year ahead.

Table 1: comparison of property sector confidence vs. UK overall and other sectors

 

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

UK

12.8

16.7

24

31.7

37.2

ALL PRODUCTION

6.6

17.8

20.5

26.1

27.9

Energy, Water & Mining

4.3

20.3

11.7

14.2

21.6

Manufacturing & Engineering

7.4

17

23.5

30.1

30.1

Construction

13.8

22.7

31.4

37.8

52.2

ALL SERVICES

14.2

16

24

32.5

37.6

Retail & Wholesale

12.4

9.3

22.4

34

34.7

Transport & Storage

14.9

7

19.5

28.5

37.1

Banking, Finance & Insurance

13

30.1

28.6

35.6

41.6

Property

16.5

19

18.2

44

43

Business Services

12.6

11.1

22.6

31.3

39.7

IT & Communications

19.7

25.5

30.8

22.9

30.5

Clare Hartnell, Partner and Head of Property and Construction at Grant Thornton UK LLP, commented: "It is encouraging that property companies continue to maintain confidence into the year ahead although, given the impact the economic downturn has had on the sector, fragility in the marketplace is likely to affect significant growth.

"Through our conversations with clients across the country there is feeling the property market is bouncing back and it will be widespread. However, there is some concern within the sector that the increasing residential London property prices may not be sustainable in the longer term.

"Looking at the UK more widely, the latest figures from the National House Building Council reveal the number of homes built in the last year was at its highest since the downturn, which is good news. There is still a massive supply shortage in the housing market though, so it's important this trend continues.

"Strong confidence reported in the Confidence Index by construction businesses is also a positive indicator, as this sector has a knock-on effect to the property marketplace."

Confidence in the construction sector has surged ahead of other businesses with a significant increase of +52.2 on the Confidence Index, up from +37.8 in Q4 2013. In Q1 2013 it came in at just +13.8.