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.
