Housebuilders costs increased by 1.7% in 1Q2021 and by 3.6% between 1Q 2020 and 1Q 2021 according to the BCIS Private Housing Construction Price Index (PHCPI).
Housing construction output grew by 2.7% in 1Q2021 compared with the 4Q 2020 but fell by 1.2% on the annual basis.
Majority (94%) of respondents to the survey reported increases in costs. Of those, 44% stated increases in cost of materials, 37% indicated changes in both labour and material costs, 13% stated sub-contractors’ costs while 6.0% indicated labour costs.
Insulation, aggregates, timber and timber products, steel as well as shortages of building materials, higher costs of transport, energy and labour costs/availability remain among the key cost pressures mentioned by respondents.
Cost pressure is expected to continue into the 2nd quarter of 2021, with respondents expecting their costs to continue rising by a further 2.1%.
The key factors influencing business operations in the first quarter as identified by the respondents were:
- material availability (56%)
- supply chain delays (17%)
- material price increases (11%)
- labour availability (11%) and
- reduced productivity (6%)
On site productivity continues to improving for companies across the sector. Respondents to the survey noted that on average, productivity in January to March compared with the levels pre-COVID-19 lockdown, stood at 93%, compared to 88% in December.
When asked about productivity once revised working practices are established, respondents expect productivity to range between 85% and 100%, at an average of 96% (as a % of pre-COVID-19).
The prospects of how the market rates in the construction industry will develop in the coming months is difficult to clearly define. Rising material and labour costs, shortages of construction materials and labour (including skill shortages), planning system and compliance availability, are perceived to be biggest challenges in 2021 by respondents.
The PHCPI is based on housebuilders' costs in constructing a standard house. The index is adjusted for changes in specification and reflects only the movement in the underlying direct costs to housebuilders.
