UK Economic Brief

Published: January 2005
Source/Company: RICS Public Affairs

Abstract:
Economy

* Growth in economic output for the third quarter showed a sharp slowdown
* Some slowdown in growth is not unexpected due to weaker signals emanating from business surveys over the summer
* Manufacturing activity has been disappointing, being the main drag on the economy
* Government expects growth rebound in 2005 on stronger export sales and business investment

Commercial property market

* The occupier market appears to be bottoming out as demand conditions have improved gradually through 2004
* A turnaround in activity within the office market has brought about stability in rents
* However, retail enquiries for space have declined as competitive pressures continue to squeeze profitability
* Investment demand for commercial property remains strong, with financial returns for property outperforming other major asset classes again

Construction

* A steady picture of rising activity continues in the construction industry
* Commercial building activity was the main source of growth in 2004 following a drop in output in 2003
* Housebuilding in both public and private sectors is still firm but the housing market slowdown may weaken activity going forward
* Slowing public works activity has been evident for some time but the government is expecting a huge uplift in 2005 following a large underspend in 2004

Residential

* Growing affordability constraints and uncertainty as to the direction of the housing market have been reflected in a slowdown in sale transactions
* House price inflation has also slowed sharply according to mortgage lenders
* However, there is no notable distress in the household sector, whilst buy-to-let landlords show few signs of panicking

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