Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 2.0% in 2Q2025, the same as was reported in the first quarter of the year.
On a quarterly basis, this represented a 0.7% increase compared with 1Q2025, also the same lift as had been seen in the previous quarter.
At the same time, ONS construction output figures demonstrate reduced pressure on the private housing sector.
In 2Q2025, private new housing output saw a quarterly increase of 1.4% and the sector was up by 5.7% on the same quarter a year earlier.
Dr David Crosthwaite, chief economist at BCIS, said: “After the government announced new planning powers for local councils to bolster the number of new homes being delivered by 2030, we asked housebuilders if they feel this strikes the right balance between accountability and supporting private sector delivery.
“Tellingly, more than half of respondents (54%) said they thought it would have no impact on delivery, while less than one-quarter (23%) said they thought it would increase delivery and 8% predicted a decrease in delivery.
“All signs so far are that the government still has major inroads to make on boosting activity levels if it is going to come close to achieving its housebuilding target in this Parliament. Ideally that would mean working with both developers and local councils to achieve increased output and not being seen to put them in opposition.”
Of the respondents reporting a change in costs in 2Q2025, 38% reported an increase in materials’ costs and a further 33% cited subcontractor cost increases as the main drivers.
Labour cost increases were noted by 24% of respondents, while 5% reported lower subcontractor costs as the reason for construction cost change for the quarter.
Looking to 3Q2025, 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%.
BCIS thanked the PHCPI survey respondents for their contribution.
