Construction Products Association warns government that output will dive if scheme is wound up in 2021

The government has been issued with a dire warning that private housebuilding will start to decline next year unless ministers extend the Help To Buy scheme beyond 2021.

In its latest forecasts the Construction Products Association (CPA) said the private housebuilding markets in the North and Midlands were being buoyed by Help To Buy, offsetting declines in London and the south east.

But while it was forecasting housebuilding output to rise by 5% this year and 2% in 2019, the CPA said its estimates depended on the government rolling over the Help To Buy scheme when the current deal ends in 2021.

It added: “Over the last 12 months, the equity loan accounted for almost one third of all housebuilding sales. Without an extension, housing starts are expected to start declining from 2019.”

Last month, the Home Builders Federation said the government should continue to back the Help to Buy initiative, saying it has increased the number of homes built and created thousands of jobs during its five years. The HBF said more than 80% of those who have used it were first time buyers and that the value of the government’s investment had gone up an estimated £1bn to £9.8bn.

The CPA also slashed its growth forecast for infrastructure output for next year, down from 13% to 8.7%.

There were concerns that government might not be able to deliver major projects “with the cost overruns and delays seen recently on Crossrail”, the CPA added

The association also warned that Brexit could play havoc with the commercial sector, especially the offices sub-sector, where output is expected to fall 10% in 2018 and twice that figure next year.

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The CPA says Help to Buy, being used on schemes such as this one in north London, has to be extended beyond 2021

Added to uncertainties around what sort of deal the UK is likely to get when it leaves the EU at the end of next March, the output fears have led the CPA to expect overall construction growth to flat-line this year and rise by a mere 0.6% in 2019.

Noble Francis, the CPA’s economics director, said overall construction output was expected to rise next year, “but this is highly dependent on house building outside London and major infrastructure projects offsetting falls in other sectors.

“The forecasts assume that the UK and EU will agree a deal on Brexit towards the end of the year but the continued uncertainty over a ‘No Deal’ Brexit has already had a big impact on construction new orders in construction sectors dependent on high upfront, often international, investment for a long-term rate of return.

“Even if the UK government eventually agrees a deal with the EU on Brexit, construction output in all these sectors is expected to fall sharply during 2019 due to falls in new orders, which have already occurred in the past 18 months, feeding through to activity on the ground.”

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