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Is construction a good investment for early 2022?

21/02/2022

2021 was a mixed bag for the construction sector. While supply chain problems thanks to Brexit and Covid meant that a great deal of building work was delayed, the stamp duty holiday and demand for properties with home office spaces led to a surge in house prices. 

Many are predicting that 2022 is likely to bring similar levels of disruption to the construction industry. Further supply chain issues, the Building Safety Bill, collateral warranties and more have been cited by some as reasons why the sector may face further struggles this year. But how does the construction sector look from an investor’s perspective? 

 

Government funding

In the Autumn Budget, Rishi Sunak announced a “multi-year housing settlement” of almost £24bn to build up to 180,000 affordable homes, predominantly focusing on brownfield sites. While this is a positive step forward, many believe that the government’s investment is not enough to tackle the shortfall in the number of new homes being built. 

However, others in the industry are less than impressed with the introduction of the Residential Property Developer Tax and a new cladding tax, while others lament the missed opportunity to reform stamp duty and the court system. 

It appears that the government could be doing more to bolster the construction industry. But what about businesses operating within the industry? 

 

Positive moves

Both rental and sale prices, predict some, are likely to continue to soar in 2022. Rightmove expects a 5% increase in average asking rents this year, and in January, saw asking prices for property sales rise by a further 0.3%.

Individual companies are also starting to share more positive news. In the most recent IHS Markit/CIPS UK Construction Purchasing Managers’ Index, fewer survey respondents reported supply delays in December compared with November, while builders also reported “the strongest order numbers since August”. 

Developer Peabody and construction material distributor Brickability have both announced positive results, and despite the sector’s underperformance, many are confident that this signals more positive times ahead. Interactive Investor Head of Markets, Richard Hunter, says, “There is good mortgage availability, house prices are rising and interest rates are very low. These conditions should offer housebuilders a solid and supportive backdrop”. 

There are many ways to invest in the construction sector, as we explain here. Despite continued stumbling blocks that the sector faces, many are confident that there are plenty of causes for optimism for the construction sector for 2022, with opportunities for investors who want to make the most of a sector that looks set to bounce back after a few tricky years. 

 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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