The Building Cost Information Service’s Private Housing Construction Price Index surveys a range of small, medium and national builders of houses and flats each quarter. The most recent survey found that 38% of respondents reported the key driver of inflation as material costs. A further 31% say subcontractor costs having the biggest impact, while 23% say the most important factor was labour. Finally, 8% of respondents who had seen a change, saw a drop in materials costs as a key factor.
The survey also asks respondents to look ahead. On average, they expected costs to rise quarter-on-quarter by 1%, up from a 0.3% quarterly in Q4 2025.
Dr David Crosthwaite, chief economist at the Building Cost Information Service (BCIS), said: “Annual housebuilding cost inflation remains modest at 2%, with only limited movement on the quarter. Although output has weakened, new orders have strengthened and builders expect a 1% rise in costs in the first quarter of 2026, which would nudge annual growth slightly higher.
“The picture is therefore one of relative stability, but whether that translates into increased delivery will depend on wider market confidence as much as cost conditions.”
The report comes as Iran has responded to recent US-Israeli attacks by threatening shipping in the Strait of Hormuz, a key route for oil tankers. On Friday, BCIS senior economist Sam Parkin said that while this was unlikely to have an immediate impact on building activity, rising energy costs and potential supply chain disruption could put upward pressure on inflation.
The UK is not a key customer for oil shipped via the strait, and has diversified its energy supplies since the spike seen in prices at the start of Russia’s expanded aggression against Ukraine. However, Parkin warns, with materials, delivery and plant costs linked to energy prices, if elevated energy prices were sustained, they would likely place upward pressure on construction input costs across several parts of the supply chain.
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