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 at end of 2025

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 2.0% in 4Q2025, down from a peak of 15.3% in 2Q2022.

On a quarterly basis, this represented a 0.3% increase compared with 3Q2025.

Dr David Crosthwaite, chief economist at BCIS, said: ‘Annual housebuilding cost inflation remains modest at 2%, with only limited movement on the quarter. Although output has weakened, new orders have strengthened and builders expect a 1% rise in costs in the first quarter of 2026, which would nudge annual growth slightly higher.

‘The picture is therefore one of relative stability, but whether that translates into increased delivery will depend on wider market confidence as much as cost conditions.’

ONS construction output figures demonstrate ongoing pressure on the private housing sector. In 4Q2025, private new housing output saw a quarterly decrease of 3.6%, and a 3.1% 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 2.4% on the year in 4Q2025. On the quarter, new orders were up 13.5% in 4Q2025.

^{Source: ONS, BCIS}

Dr Crosthwaite said: ‘Since the government announced new planning powers for local councils to bolster the number of new homes being delivered by 2030, we’ve been asking housebuilders if they feel this strikes the right balance between accountability and supporting private sector delivery.

‘In the fourth quarter, more than one-third (37.5%) of respondents said they thought it will increase delivery (compared with half in 3Q2025), while 62.5% said they thought it would have no impact on delivery (compared with one-third in 3Q2025). No respondents said they thought it would reduce delivery (compared with 17% in 3Q2025).’

Of the respondents reporting a change in costs in 4Q2025, 38% reported an increase in materials’ costs and a further 31% cited subcontractor cost increases as the main drivers. Labour cost increases were noted by 23% of respondents and 8% reported lower materials costs.

Looking to 1Q2026, the housebuilders surveyed said they expected to see an average increase in costs of 1% on the quarter, which would produce stronger annual growth than has been in seen in recent quarters 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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