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

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 2.0% in 3Q2025, down from a peak of 15.3% in 2Q2022.

On a quarterly basis, this represented a 0.3% increase compared with 2Q2025.

Dr David Crosthwaite, chief economist at BCIS, said: ‘The latest PHCPI results show a period of relative stability, with annual inflation and quarterly movements remaining modest. That should provide some welcome predictability for housebuilders after a volatile couple of years.

‘However, softer output data underlines that cost pressures are not the only challenge. If the government wants to support higher levels of delivery, it will need to focus on creating the conditions for builders to convert this more stable cost environment into increased activity on the ground.’

ONS construction output figures demonstrate ongoing pressure on the private housing sector. In 3Q2025, private new housing output saw a quarterly decrease of 1.9%, though the sector was up by 2.4% on the same quarter a year earlier.

New orders in the sector – a snapshot of potential activity in construction – showed private housing was up 9.1% on the year in 3Q2025, but this was due to the sharp decline in new orders recorded in 3Q2024, the lowest it had been since the pandemic lockdown. On the quarter, new orders were down 5.1% in 3Q2025.

^{Source: ONS, BCIS}

Dr David Crosthwaite, chief economist at BCIS, 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 third quarter, half of respondents said they thought it will increase delivery (compared with 23% in 2Q2025), while one-third said they thought it would have no impact on delivery (compared with 54% in 2Q2025). One in six (17%) thought it would reduce delivery (compared with 8% in 1Q2025).’

Of the respondents reporting a change in costs in 3Q2025, 47% reported an increase in materials’ costs and a further 40% cited subcontractor cost increases as the main drivers. Labour cost increases were noted by 13% of respondents.

Looking to 4Q2025, the housebuilders surveyed said they expected to see an average increase in costs of 0.3% on the quarter, which would produce annual growth of 2.0%.

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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