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.

Housebuilding cost inflation rises to 3.3% in 2Q2026

Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 3.3% in 2Q2026, up from 2.3% in the previous quarter. The index rose by 1.6% on the quarter, in line with the expectation reported by housebuilders in the 1Q2026 survey. The figures are provisional and subject to change.

Dr David Crosthwaite, chief economist at BCIS, said: ‘The increase shows that cost pressures are still feeding through to housebuilders, even as private housing activity remains subdued. For schemes where viability is already tight, a further rise in construction prices makes delivery decisions more difficult.’

ONS construction output figures show that private new housing output rose by 1.1% in 2Q2026 compared with the previous quarter, but remained 6.7% below the same quarter a year earlier. Private housing new orders fell by 3.7% on the quarter, although they were 12.9% higher than a year earlier.

Dr Crosthwaite said: ‘The quarterly rise in output is welcome, but activity remains below last year’s level. The fall in new orders also underlines how uneven recovery is likely to be.’

^{Source: ONS, BCIS}

Among survey respondents reporting a change in costs, 56% identified an increase in materials costs. A further 28% cited higher subcontractor costs and 11% cited higher labour costs. Around 5% reported a decrease in materials costs.

Looking to 3Q2026, housebuilders surveyed expect prices to rise by an average of 1.3% on the quarter.

Dr Crosthwaite added: ‘Materials remain the most commonly reported source of cost pressure. Housebuilders expect prices to rise again next quarter, while the weakness in output means their ability to absorb further increases will vary from scheme to scheme.’

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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