Main Factors Which Determine the Demand for the Construction of Built Facilities and Outline How These Factors Have Operated on This Demand in the Last Two Years.

Topics: Inflation, Economics, 2009 Pages: 6 (2171 words) Published: November 29, 2010


The determination of demand of goods and services produced the construction industry is a complicated process. This is partly due to the cost, size, longevity and investment nature of the and partly due to the broad range of what constitutes construction activity. It is difficult to envisage just one housing market (Danny Myer, 2004).Factors affecting built facilities construction demand can be categorised as general and local factors. General factors are political, economic, social, and technological and legal/legislative based. Local factors include a combination of building types, procurement types and geographical location (Akintoye et al, 1994). The consensus in the construction industry is that the interest rates and general business confidence have the greatest bearing on the private sector workloads (Beard Dove, 1991). Hillebrandt (1985), however, has extended this to the following list of general leading indicators of construction demand; 1. Population

2. Interest rate
3. Shocks to the economy
4. The demand for goods
5. Surplus manufacturing capacity
6. The ability to remodel
7. Government policy (monetary, fiscal, e.g. tax policies)
8. Expectation of continued increased demand (for manufacturing goods) 9. Expectation of increased profits (on the activities of those that demand construction) 10. New technology
These factors have been investigated as the potential leading indicators of the USA construction demand (Akintoye, 1994). For the UK, the general factors of construction demand are grouped into the following: economic conditions, construction price, real interest rate, unemployment level, and profitability (Akintoye, 1994) ECONOMIC CONDITIONS

Construction of new built facilities is considered to be a major investment which adds value to the Gross Domestic Product (GDP) of a nation (McConnell et al, (2009). A single indicator of economic conditions is national income. Among other factors, the quantity and to some extent quality of construction demand is dependent on the national economy. There is a relationship between construction demand and the growth in GNP, as a measure of the economic wellbeing of a nation (Hutcheson, 1990). The mechanism for this is thought to be that the demand for construction work is derived from the demand for consumer goods. A period of economic prosperity tending to raise consumer demand for goods and services which, in turn, triggers up the demand for construction space. In the last two years the economic conditions have acted in the built facilities construction demand. The effects of the recession which engulfed the World economy also affected all aspect of the UK national economy. In December 2008, the construction sector shrank at its fastest since records began (The Times 100). The most considerable Decline was registered in the house building, while the civil engineering and commercial sub-sectors also fell at records rates during that month. This has led to the expectations that the Bank of England will cut the interest rate following its two day meeting during the 5th January 2009 to reduce borrowing costs to the lowest level in its 314 year history (Times Online,5 January 2009). As well as the decline in housing construction sector, the housing market has also slumped. According to the Halifax, houses prices fell 16.2% 2008, the biggest annual decline since it began keeping records in 2003( BBC news, 2 January 2009). But after the world financial crisis passed, the construction industries have been recovering for some time with an estimated output growth in the second quarter of this year was 6.8%.

This table was outsourced from, as shown in the table; the output of the construction industry has been declining since March 2008...
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