Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), stood at 2.3% in 1Q2026, up on the 2% increase reported in the final quarter of 2025.

At the same time, construction output figures demonstrate ongoing pressure on the private housing sector. In 1Q2026, private new housing output saw a quarterly decrease of 2.6%, and a 6.7% decline on the same quarter a year earlier.

Dr David Crosthwaite, chief economist at BCIS, said: “While housebuilding cost inflation remains significantly below the peak levels seen in 2022, the sector continues to operate against a difficult backdrop. Weak buyer demand, affordability pressures and elevated financing costs are all continuing to weigh on activity and confidence across the market.”

As part of the 1Q2026 survey, housebuilders were asked what they see as the main threats to the recovery of the UK housing sector. The most common answers were macroeconomic uncertainty and rising materials costs, followed by planning, policy and regulatory challenges, then weak buyer demand and affordability constraints.

Dr Crosthwaite said: “The survey responses underline how complex the recovery challenge has become for housebuilders. Alongside cost pressures, the sector is continuing to adapt to planning, policy and regulatory change, while uncertainty around the wider economic outlook is making investment and delivery decisions more difficult.”

Of the respondents reporting a change in costs in 1Q2026, almost half (47%) reported an increase in materials costs and a further 33% cited subcontractor cost increases as the main drivers. Labour cost increases were noted by 20% of respondents.

Looking to 2Q2026, the housebuilders surveyed said they expected to see an average increase in costs of 1.6% on the quarter, which would produce stronger annual growth than has been in seen in recent quarters of 3.3%.

Dr Crosthwaite commented: “The expectation of stronger cost growth in 2Q2026 indicates that inflationary pressures are continuing to feed through the sector. Materials and subcontractor costs remain the primary drivers, while higher energy and transport costs, geopolitical pressures and increasing regulatory requirements are all adding to the cost base facing housebuilders.”

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 email contactbcis@bcis.co.uk.

For more information about BCIS, please visit: www.bcis.co.uk