Housing decline hits construction

The construction industry was weakest in the north of England

A slowing housing market has hit the UK construction industry, with growth falling to its lowest level since 1996, according to a report.

The Royal Institution of Chartered Surveyors study said 1% more surveyors reported a rise in workloads than a fall in the first three months of 2008.

This was down from 16% in the final three months of 2007.

Construction of residential housing was worst affected, particularly in the north of England, RICS said.

Home builders react to challenging conditions in the housing market by reducing the number of new homes under construction RICS senior economist David Stubbs

Growth in private commercial construction also slowed, the survey found.

RICS senior economist David Stubbs said the data made it unlikely that the government will reach its targets for the building of new homes.

"Private residential workloads are now shrinking as home builders react to challenging conditions in the housing market by reducing the number of new homes under construction," he said.

"This emphasises the difficulty that the government will have in encouraging higher house building levels during periods when the housing market is soft."

Last year the government announced plans to build a total of three million new homes by 2020.

The survey also found that expectations for profit margins in the construction industry fell for the second time since the survey began.

The UK housing market now looks as if it will go through its biggest downturn since the early 1990s, the survey said.

Alongside a growing expectation among buyers and sellers that prices will fall, many lenders are finding it hard to raise the money necessary to fund their mortgage operations.