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.

Stronger growth in housebuilding cost inflation

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 1.7% in 4Q2024, down from a peak of 15.3% in 2Q2022.

On a quarterly basis, this represented a 0.3% increase compared with 3Q2024.

At the same time, ONS construction output figures demonstrate reduced pressure on the private housing sector. In 4Q2024, private new housing output saw a quarterly increase of 1.3% and the sector was up by 3.8% on the same quarter a year earlier.

^{Source: ONS, BCIS}

Karl Horton, BCIS Head of Data Services, 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 expected impact on their own output volume over the next two years.

‘Tellingly, 47% of respondents said they are expecting an increase in the volume of projects in the range of 0-5%, 40% said they are not expecting any change, and just 13% said the increase would be in the range of 5-10%.

‘In order to reach the levels required to meet this target – an average of around 1,000 homes per day – there’s going to need to be a significant uptick in activity. With the government announcing further measures to boost demand among both larger housebuilders and SMEs over the next couple of years, it will be interesting to see if that sentiment shifts over the coming quarters.’

Of the respondents reporting a change in costs in 1Q2025, 40% reported an increase in materials’ costs and another 40% cited subcontractor cost increases as the main drivers.

Labour cost increases were noted by 10% of respondents. 5% reported lower labour costs and the remaining 5% cited a decrease in material costs as the reason for construction cost change for the quarter.

Looking to 2Q2025, the housebuilders surveyed said they expected to see an average increase in costs of 1.0% on the quarter, which would produce annual growth of 2.3%.

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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