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. 

Growth in housebuilding cost inflation slows further

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), continued to cool in 1Q2024, standing at 0.7%, down from a peak of 15.3% in 2Q2022. 

On a quarterly basis, this represented a 0.3% increase compared with 4Q2023. 

At the same time, ONS construction output figures clearly demonstrate continued pressure on the private housing sector. In 1Q2024, while private new housing output saw a quarterly increase of 1.3%, the sector was down by 13.7% on the same quarter a year earlier. 

43% of respondents pointed to an increase in materials’ costs being behind the overall increase. 29% said they had experienced increased labour costs. 14% reported both materials and labour costs rising.  

A small minority, 5%, reported a decrease in materials costs. A further 5% said they had experienced lower labour costs. An increase in subcontractors’ costs was also reported by 5%. 

Looking to 2Q2024, the housebuilders surveyed said they expected to see another slight increase in costs, an average of 0.3%. 

One of the respondents to the PHCPI survey noted that while the costs and supply of materials are relatively stable, the planning process and getting approvals remains one of the largest obstacles. 

Both Labour and the Conservatives have pledged to address housing shortages through planning reforms. 

Although headline inflation has eased, with the Bank of England’s base rate held at 5.25% and household budgets still stretched, residential output is likely to be impacted for some time. 

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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