Latest movement in the private housing construction price index

The BCIS Private Housing Construction Price Index is a measure of the prices paid by housebuilders for constructing houses/flats, i.e. changes in the costs of direct/subcontracted labour, plant and materials, overheads and profit attributed to the construction, but excluding the cost of land and other development costs and any development profit.

A range of small, medium and national housebuilders are surveyed each quarter to identify the change in prices paid for constructing a standard house type. Contributors are also asked to provide their expectations for price changes in the following quarter and the mean of these projections is published as a forecast for the current period.

Continued growth in housebuilding cost inflation

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 1.4% in 3Q2024, down from a peak of 15.3% in 2Q2022.

On a quarterly basis, this also represented a 0.3% increase compared with 2Q2024.

At the same time, ONS construction output figures demonstrate continued pressure on the private housing sector. In 3Q2024, private new housing output saw a quarterly increase of 0.7% but the sector was down by 4.1% on the same quarter a year earlier.

^{Source: ONS, BCIS}

Karl Horton, BCIS Chief Data Officer, said: ‘In light of the government targeting 1.5 million new homes over the course of this Parliament, we’re also asking housebuilders about the current and expected impacts on their operations.

‘Respondents are hopeful that the reforms to planning policy will help to speed up the process, but also pointed to there being insufficient labour to meet such ambitious numbers.

‘One housebuilder commented if we get anywhere near the government’s pledged number, it will cause major cost inflation as there is not the labour or materials available to support it.’

Of the respondents reporting a change in costs in 3Q2024, 37% reported an increase in subcontractors’ costs, 32% pointed to an increase in materials costs, and the remaining 32% said they had experienced increased labour costs.

Looking to 4Q2024, the housebuilders surveyed said they expected to see an average increase in costs of 0.3% on the quarter.

We would like to thank the PHCPI survey respondents for their contribution.

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

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