Steady growth in housebuilding cost inflation reported in third quarter of 2025
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Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 2.0% in 3Q2025, the same as was reported in the second quarter of the year.
On a quarterly basis, this represented a 0.3% increase compared with 2Q2025.
At the same time, ONS construction output figures demonstrate renewed 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, showed private housing was up 9.1% on the year in 3Q2025, though this was largely 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.
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.”
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%.
BCIS thanked 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
For more information about BCIS, please visit: www.bcis.co.uk
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Editors notes
About BCIS:
The Building Cost Information Service (BCIS) is the leading independent provider of construction data to the built environment and insurance sectors. For some 60 years, BCIS has been collecting, collating, analysing, modelling and interpreting cost information to support built environment professionals, helping them provide cost advice, to have confidence in commercial decision-making and to mitigate risk. BCIS was recognised at the Engineering Matters Awards 2024 with The Net Zero Champion Gold Award for its leading role in the development of the Built Environment Carbon Database.
About the PHCPI:
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.
