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Housing starts lowest since 1924 as construction bears brunt of recession

Published 15th Dec 2008

The number of homes being built in Britain has plummeted to its lowest level since the early 1920s as falling house prices exacerbate the crisis in the construction industry.

A report out today from the Construction Products Association (CPA) and Ernst & Young reveals there have been just 135,000 housing starts this year, compared to 203,500 in 2007. This figure, excluding the second world war when few houses were built, is the lowest since 1924, when there were 87,000 housing starts during a period of severe deflation.

Many projects date from before the worst of the financial crisis hit and there are fears that homebuilding will grind to a virtual standstill in the new year - leading to tens of thousands of job losses in the building trades.

Commercial property is also being hit hard, with the CPA expecting falls in office construction alone of 24% next year and 19% in 2010.

The CPA said this was partly offset by the increase of public sector spending on construction. However, this increase in spending, which the Treasury anticipates will lead to unprecedented government borrowing over the next few years, will not be enough to stop overall construction falling significantly over the next two years.

Demand for new houses has plunged over the past year as would-be buyers have been unable to obtain mortgages from struggling banks and building societies despite falling interest rates.

The Bank of England said mortgage approvals hit a record low in October, despite a fall in interest rates at the start of the month. Lenders approved 32,000 home loans for buyers during the month, equalling the record low hit in August and down 27% from the 2007 peak.

There is now considerable doubt whether the government can fulfil its target of building 3m homes by 2020. The prime minister, Gordon Brown, and housing minister Margaret Beckett held a crisis meeting with several industry bodies, including the Home Builders Federation and the Council of Mortgage Lenders, last month to try to come up with ideas to revive the flagging sector. The consensus of the meeting attended by Construction Skills and HBOS was that not much can be done until banks start lending again.

The downturn in the housing market will result in huge job losses. Thousands of builders, electricians, plumbers, removal people and carpenters are likely to lose their jobs. Accountants BDO Stoy Hayward said this month that 6,400 construction businesses could fail by mid-2009.

Roger Humber, strategic policy adviser to the House Builders Association, said earlier this year that 250,000 people whose jobs are linked to the building industry could be put out of work if the housing downturn persists.

"Many more thousands of self-employed tradesmen and sub-contractors, building materials producers, manufacturers of white goods, carpets, curtains, DIY, estate agents and solicitors would be affected. If this continues to unwind, ultimately there's no reason why it couldn't affect a quarter of a million jobs," he said.

Source: ' Guardian '

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