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Profit expectations for the construction industry are at their highest levels for five years despite higher interest rates and rising material costs, an industry survey reported this week.

The RICS鈥� market survey revealed that construction was expanding its capacity partly in response to demand for commercial buildings.

Ryan Emmett, an economist at the RICS, said investors were eager to invest in commercial property. He said: 鈥淚t is seen as a safe haven for their money compared with other assets such as equities.鈥�

Emmett added that strong investment demand was insulating the construction industry from rises in oil and steel prices.

Over the last quarter of 2004, 21% more chartered surveyors reported rises in construction work than reported a fall. Workloads increased in northern England, and were at a five-year high in Northern Ireland.

In London, the South-east and the Midlands, growth was moderate, with the commercial sector showing the most signs of activity (see story page 22). In Wales and Scotland growth was modest, whereas it fell in the South-west, owing to a drop in private housebuilding.

The survey reported a rebound in the public sector and private housing sector in the fourth quarter of 2004 following a stagnant period in the third quarter.

The survey contrasts with a predicted fall in construction output growth by the Construction Products Association (7 January, pages 18-19).

The RICS said the improving economy was expected to increase demand for workers, and 35% more surveyors expected employment to rise than expected it to fall in the next three months.

n The average price of a new home fell by 0.9% to 拢266,380 last month according to SmartNewHomes.com. The survey said the slowdown had returned prices to levels seen at the start of 2004, but the stabilisation of prices over the past few of months indicated that some confidence had returned to the market. David Bexon, chief executive of SmartNewHomes, said a lack of housing supply would minimise any price decreases.