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.

Steady growth in housebuilding cost inflation in early 2026

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 2.3% in 1Q2026, down from a peak of 15.3% in 2Q2022 and up on the 2% increase reported in the final quarter of 2025.

Dr David Crosthwaite, chief economist at BCIS, said: ‘While housebuilding cost inflation remains significantly below the peak levels seen in 2022, the sector continues to operate against a difficult backdrop. Weak buyer demand, affordability pressures and elevated financing costs are all continuing to weigh on activity and confidence across the market.’

ONS construction output figures demonstrate this ongoing pressure on the private housing sector. In 1Q2026, private new housing output saw a quarterly decrease of 2.6%, and a 6.7% decline on the same quarter a year earlier.

New orders in the sector – a snapshot of potential activity in construction – showed private housing was up 17.7% on the year in 1Q2026. On the quarter, new orders were up 4.8%.

Dr Crosthwaite said: ‘The increase in private housing new orders is a positive signal for the sector, but new orders data can be volatile from quarter to quarter and should be treated with a degree of caution. The key question will be whether this improvement translates into sustained activity on site over the coming quarters.’

^{Source: ONS, BCIS}

As part of the 1Q2026 survey, housebuilders were asked what they see as the main threats to the recovery of the UK housing sector. The most common answers were macroeconomic uncertainty and rising materials costs, followed by planning, policy and regulatory challenges, then weak buyer demand and affordability constraints.

Dr Crosthwaite said: ‘The survey responses underline how complex the recovery challenge has become for housebuilders. Alongside cost pressures, the sector is continuing to adapt to planning, policy and regulatory change, while uncertainty around the wider economic outlook is making investment and delivery decisions more difficult.’

Of the respondents reporting a change in costs in 1Q2026, almost half (47%) reported an increase in materials costs and a further 33% cited subcontractor cost increases as the main drivers. Labour cost increases were noted by 20% of respondents.

Looking to 2Q2026, the housebuilders surveyed said they expected to see an average increase in costs of 1.6% on the quarter, which would produce stronger annual growth than has been in seen in recent quarters of 3.3%.

Dr Crosthwaite added: ‘The expectation of stronger cost growth in 2Q2026 indicates that inflationary pressures are continuing to feed through the sector. Materials and subcontractor costs remain the primary drivers, while higher energy and transport costs, geopolitical pressures and increasing regulatory requirements are all adding to the cost base facing housebuilders.’

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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