The market seems to be at a turning point as input cost inflation and demand pressures fall. This will see tender price inflation slow allowing investors some incentive to take projects forward. The growth in insolvencies is worrying and new regulations may put back schemes that need to be redesigned. There are more regulations on the horizon, which should result in safer and more environmentally friendly buildings, which can only be a good thing in the long run.
Tender prices in 2Q2023 rose by 1% compared with the previous quarter, and by 4.9% on the same period last year. Labour site rates have been rising faster than wage awards and labour costs are expected to become the main driver of the growth in overall costs in the second half of 2023 as the wage awards catch up. Materials’ inflation has been easing and supply chain issues are being mostly resolved. Annual growth in tender prices is expected to continue to ease, standing at 2.4% in 2Q2024. It is not until the 2Q2025 that tender prices are likely to rise faster than costs, with tender prices forecast to rise by 16% in the five years to 2Q2028.
New construction output is expected to contract in 2023-2024, mainly driven by a significant reduction in new housing output. Total new work output is expected to return to positive growth in 2023 with growth forecast at 13% between 2023 and 2028.
Tender Prices, Building Costs and Material Costs (BCIS TPI, GBCI and Materials Cost Index annual increase 2Q to 2Q, output is based on the whole year on whole year)
The full forecast of prices, costs and demand is available in the Briefing section of the BCIS online service BCIS Online – Building Cost Information Service Online.
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