“The construction industry is a sector of the national economy engaged in preparation of land and construction, alteration, and repair of buildings, structures, and other real property” (BusinessDictionary, 2016). This sector in recent years has experienced declines in growth and has growing tendencies of entering a recession. It has to be recognised that it is an extremely volatile industry which has adverse effects on macroeconomic objectives some of which includes economic growth and unemployment. This sector also affects aggregate demand and aggregate supply; all of which will be analysed and evaluated in conjunction with diagrams and the impact that they have on the economy in general. In addition to this, the effects that this sector has on the housing sector will be analysed. These areas will be critically analysed and evaluated to demonstrate the impact that they have on the economy in general. Downfall within the construction sector is detrimental to the UK economy, due to it being one of the largest industries in the UK. “This can be illustrated by the accounting of approximately £110 billion per annum of construction output and 7% of GDP”. (Designingbuildings, 2016). This results in a knock on effect on the housing sector because it is a large part of the construction sector. HOUSING SECTORThe construction industry is usually funded by savings and borrowing, effects of the decline can be shown clearly by the housing sector, the largest sector in the
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The housing crisis of 2008 can trace its origins back to the stock market trends of the mid- to late 90 's. During a period of extended growth in the stock market, increased individual wealth among investors led to generalized increases in spending, including in the housing market. With more disposable income in the pockets of consumers, the demand for housing increased in the late 90 's. Due to the fact that homes are large projects and their construction takes a large amount of time, the supply of homes in the market is inelastic on the short term. Because of the fixed supply of homes, as per the law of supply, which
America’s 2008 recession brought on “falling home prices and tight credit; state- and local-government cuts; higher oil prices that stood in the way of economic growth (“Back from the,” 2012). The price of homes dropped significantly pushing the equilibrium price down resulting in a shortage and an increased demand for houses at lower rates. When this occurs, suppliers are motivated to start producing fewer homes until a new market equilibrium price and quantity are achieved. After America’s recovery in 2009, suppliers slowly began to produce more homes and since that time, house prices have gradually increased (“Back from the,” 2012).
Macroeconomics is an excellent tool for the analysis of the housing industry as something like a capital good, as a home is considered to be, cannot easily be studied in a short-term platform. Real estate is a good that costs several times more than an average persons annual income, in the United States that number is typically 7 times as much, and in the United Kingdom that number is 14 times as much. Several factors of both supply and demand directly impact the housing market on a macroeconomic scale. (Business Economics, 1)
It seems hard to believe that over ten years have elapsed since the peak of the US housing market in the previous economic expansion. Residential construction as a percentage of real GDP reached a zenith of 6.2% in 2005 Q3. The ensuing contraction saw this share decline -60% to trough at 2.5% of GDP in 2010 Q3. The current economic expansion began in 2009 Q3, but the sheer magnitude of the collapse made it virtually impossible for any subsequent housing recovery to impart the same outsized contributions to headline GDP growth compared to the previous cycle. This has consequently played a significant role in restricting the ability of the economy to shift into a higher gear of growth during the current
The Australian economy is reliant on three key sectors: services, housing, and mining. The services sector employs the largest percentages of Australians – around 80 percent – and is responsible for approximately 70 percent of the country’s GDP (Australian Bureau of Statistics, 2010). With jobs in a variety of specific industries, this sector drives the success of the Australian economy. The housing sector is experiencing unprecedented growth leading to concerns over a potential asset bubble. An increase in the amount
Seven years removed from recession, American homeowners are beginning to rebound from the hold created by the housing crisis. Throughout history, the housing market has been a key indicator of financial stability and the real economy. Housing booms and bust are often reflections on the mortgage market, labor mobility and consumer spending. With interest rates near zero, at the moment, the real estate market has experienced a steady rise in new and existing home sales, prices and mortgages. Likewise, developments in the U.S. housing market have been instrumental to gains in home improvement spending. In 2015, home improvement retailers, Lowe’s and Home Depot have delivered better than expected results thanks to the housing market recovery. Despite what may seem like a modest recovery, there remains significant concerns that the recovery will be short lived. Some evidence would suggest that interest rates, a flood of foreign investments, income inequality and the same culprits from 2008 are re-inflating a housing bubble.
Housing demand includes household growth, real incomes, real wealth, tax concessions to both owner-occupied and rental housing, concessions to first homebuyers, returns on alternative investments, cost and availability of finance for housing and the institutional structure affecting housing finance provision (Yates, 2008). The growth in the number of households and in real income results in the increased pressure on housing demand.
The new construction market in the mid 2000’s was flourishing. People saw building a home as an opportunity for a solid investment because prices and rates were so low that certain homes could depreciate extremely slowly. However, there would be a negative effect from all this low-cost new construction and few were aware of just how devastating it would be to the new construction market.
This is creating various challenges for the proper growth and advancement of the sector. Lack of regulation, organizational structure and professionalism has led to the illegal construction process with unreliable building permits and use of substandard materials in construction. In addition, poor legal framework cannot cater to the interest of all the stakeholders in the sector. Nevertheless, the private sector is playing an active role for the development of housing and real estate sector. Professional real estate developers have mobilized their scarce financial resources and even borrowed from banks and financial institutions to invest in this sector.
The major political influences on the construction industry in London at the moment are the Mayor of London’s Sustainable Design and Construction Supplementary Planning Guidance to the London Plan, the Climate Change Action Plan, and the Governments lack of response to the effects of the recession. The recession has almost completely stopped the building of new houses and has led to the mothballing of most of the
After researching the foreign markets, our department proposes that Canada would be our direction to go with to expand our business. The selection that we made is due to many factors. One of the factors involved is that Canada’s housing starts for 2012 is down by only percentage points. (Centre for the Study of Living Standards, 2012) This allows us to believe that the economy is still strong in the Canadian foreign market. There is new construction going on in Canada and there is potential for the market to go back up.
The productivity and contribution of the construction industry are made using the Australian Bureau of Statistics Econtech analysis data. A Baseline and ABCC scenarios to show the contribution of the construction industry on the macro-economy. The ABCC scenario;
The construction industry like many other industries has changed and evolved with time. It is the fourth largest contributor to Australia’s GDP and has played a major role in determining economic growth of the country. In terms of employment, the industry has employed 9% of the Australian workforce making it the fourth largest industry (ABS data).
The BIM introduction into the New Zealand’s construction industry has been discovered as the step to improve productivity and to improve efficiency. This paper seeks to the application of BIM to the New Zealand construction industry successfully and to the proper analyzing of the growth of BIM in New Zealand. Also this report elaborates the opportunity of BIM in New Zealand’s construction industry as well as compared with the other major countries using BIM. Furthermore, in this literature, the future expectation of BIM in New Zealand is discussed.
UK Construction is directly effect by changes to the economy both domestic and foreign (Drake,1994) and is directly impacted by government policy (Myers, 2013). Sloman notes that output of the industry is a reflection of the demand, in this instance buildings and this in turn influences demand for other support services and products. Kishtainy notes that the Gross domestic product (GDP) can influence the demand for a service and determine the levels of employment within and industry.