Continued 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 4Q 2024, down from a peak of 15.3% in 2Q 2022.

On a quarterly basis, this represented a 0.3% increase compared with 3Q 2024, according to the latest data from the Building Cost Information Service (BCIS).

Housebuilding Cost Inflation

The BCIS Private Housing Construction Price Index measures the prices being paid by housebuilders for constructing houses and flats. It measures the changes in the costs of direct and 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.

Expectations for Price Changes

Surveying small, medium and national housebuilders each quarter, BCIS monitors price changes paid for constructing a standard house type.

Contributors also provide their expectations for price changes in the following quarter. An average of these projections is published as a forecast.

Of the respondents reporting a change in costs in 4Q 2024, 40% reported an increase in materials’ costs, 20% pointed to an increase in labour costs, and 20% indicated an increase in sub-contractor costs. A further 20% said they had experienced a decrease in labour costs.

Looking to 1Q 2025, the housebuilders surveyed said they expected to see an average increase in costs of 0.7 % on the quarter.

Karl Horton, BCIS Chief Data Officer

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.

“More commonly, respondents said their plans are aligned with internal expectations rather than government targets. They cautioned that labour shortages, planning constraints and supply chain issues could all serve as limiting factors.”

Housebuilders wishing to participate in the BCIS PHCPI quarterly survey should email contactbcis@bcis.co.uk.

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