Annual housebuilding cost inflation, as measured by the BCIS Private Housing Construction Price Index (PHCPI), continued to cool in Q4 2023, standing at 1.7%, down from a peak of 15.3% in Q2 2022.
However, on a quarterly basis, this represented no change compared with Q3 2023, the Building Cost Information Service (BCIS) reported.
At the same time, ONS construction output figures demonstrate the continued pressure on the private housing sector.
In Q4 2023, private new housing output was down by 8% on the previous quarter, or by 22.5% on the same quarter a year earlier.
One of the respondents to the PHCPI survey noted delays in the planning system as a concern, particularly relating to shortages in planning staff dealing with reserved matters applications.
Data published by the Department for Levelling Up, Housing & Communities shows that in Q4 2023, district level planning authorities in England received 85,200 applications for planning permission, down 9% from the same quarter a year earlier.
Meanwhile, they decided 80,700 applications, down 12% on Q4 2022.
Dr David Crosthwaite, chief economist at BCIS said: “Although headline inflation has eased, with the Bank of England’s base rate held at 5.25%, household budgets stretched and no significant housing stimulus included in the Spring Budget, residential output is likely to be impacted for some time.”
In the Spring Budget, the Chancellor pledged £3 million to match industry-led funding for a skills and education programme to attract more people to take up roles as local planners in planning authorities.
Looking to Q1 2024, the housebuilders surveyed said they expected to see a slight increase in costs, an average of 0.3%.
