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.

Growth in housebuilding cost inflation unchanged from last quarter

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), continued to cool in 4Q2023, standing at 1.7%, down from a peak of 15.3% in 2Q2022.

On a quarterly basis, this represented no change compared with 3Q2023.

At the same time, ONS construction output figures clearly demonstrate the continued pressure on the private housing sector. In 4Q2023, private new housing output was down by 8% on the previous quarter, or by 22.5% on the same quarter a year earlier.

One of the respondents to PHCPI survey noted delays in the planning system as a concern, particularly relating to shortages in planning staff dealing with reserved matters applications.

In the Spring Budget, the Chancellor pledged £3 million to match industry-led funding for a skills and education programme to attract more people to take up roles as local planners in planning authorities. Data published by the Department for Levelling Up, Housing & Communities shows that in 4Q2023, district level planning authorities in England received 85,200 applications for planning permission, down 9% from the same quarter a year earlier. They decided 80,700 applications, down 12% on 4Q2022.

There was also commentary around associated costs of meeting Part L, the energy efficiency requirements of the building regulations. One respondent suggested this could bring as much as a 10% uplift on future projects.

Looking to 1Q2024, the housebuilders surveyed said they expected to see a slight increase in costs, an average of 0.3%.

Both Nationwide and Halifax reported annual increases in their House Price Indices for February 2024 – 1.2% and 1.7% respectively. Nationwide’s Chief Economist reported that house prices are now around 3% below the all-time highs recorded in the summer of 2022, after taking seasonal effects into account.

Although headline inflation has eased, with the Bank of England’s base rate held at 5.25%, household budgets stretched and no significant housing stimulus included in the Spring Budget, residential output is likely to be impacted for some time.

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

To keep up to date with the latest industry news and insights from BCIS, register for our newsletter.