Construction industry output edged ahead by five per cent to £110 billion in the first half of 2006, notes Altium Securities. Among the fastest growing areas of public housing, electricity, oil and PFI schools, the stockbroker believes the social housing market in particular ‘presents considerable opportunities for several stocks in the sector’ and advocates companies with ‘strong and transparent cash generation’.

Analyst David Philips has a ‘strong preference’ for infrastructure services over pure housebuilders, deeming that ‘rising interest rates, falling consumer sentiment and rising unemployment will place a strain on the housing market and that new build is likely to suffer disproportionately in any slowdown. Conversely, stocks exposed to infrastructure markets are likely to prove much more resolute and deliver better growth, in our view.’

Property investment collective Assetz draws attention to the marginal slowing of UK house price growth due to the August interest rate rise, adding that a further hike would produce more ruinous effects. Assetz’s managing director Stuart Law believes a further interest rate rise ‘would deliver inflation to the UK by shocking the consumer into demanding higher wages, causing price growth and creating inflation.

‘Investors and first time buyers in particular are already feeling the pinch of the last rate rise, and a further jump in rates could have a disastrous effect on the market,’ argues Law.