House build costs on the rise as industry prepares for new regulations

House building costs continue to rise at an unprecedented pace, according to the BCIS Private Housing Construction Price Index (PHCPI), growing by an all-time highest rate of 12.7% on an annual basis and 3.2% on the previous quarter. This is against a background of modest growth in private housing construction output, which shows a 0.1% quarterly increase and 0.8% increase on the 4Q2020.

All respondents to this survey noted an increase in construction costs, with 41% noting increases in the cost of materials, 23% in costs of both materials and labour, and 36% cited an increase in subcontractors’ costs.

Respondents expect their costs to continue to rise in the 1^st quarter of 2022 by a further 2.7%.

Several housebuilders have highlighted the anticipated cost of meeting the new building regulations. BCIS asked housebuilders how advanced their preparations are to meet the requirements of the new Building Regulations and the anticipated cost per dwelling or % increase in unit cost.

More than three quarters of respondents to the survey provided an answer to this question, expecting the average house building costs to increase by 5.6% for meeting the new Building Regulations.

Of the respondents, 62% said that they were at the feasibility stage of preparation and expected the impact on their construction costs to range from 2.2% to 10%, with an average uplift in building costs estimated at 6.2%.

15% are in the process of trialing revised specifications to meet new regulations and are expecting an average increase of 3.4%.

A further 15% are planning to commence a review, with a number waiting for further guidance from the government.

One respondent stated that they are already building to a standard exceeding the requirements of the revised regulations; therefore this is not expected to impact them.

BCIS will continue to monitor the readiness of the industry to meet the new building regulations.

Productivity levels when compared to the pre-Covid 19 period nearly reached pre-pandemic levels as presented below. Respondents to this survey expect productivity to further improve, within the 95% to 110% range. This is further supported by the BCIS’s TPI panel, where panelists have agreed that the productivity is back to normal, and the industry has emerged stronger and more efficient from the pandemic.

Current productivity as a % of pre-COVID-19:

With coronavirus restrictions being lifted and productivity levels reported being back to pre-pandemic levels, BCIS will stop tracking productivity as part of this survey.

We would like to thank respondents to this survey for their contribution.

The PHCPI is based on housebuilders’ costs in constructing a standard house. The index is adjusted for changes in specification and reflects only the movement in the underlying direct costs to housebuilders.

The BCIS PHCPI is published in the BCIS Online service.

If you are a housebuilder and would like to participate in the BCIS PHCPI quarterly survey, please contact data@bcis.co.uk