Nine in 10 housebuilders predict a build cost rise this year
More than 90% of housebuilders expect the cost of building work on homes in England will be even greater in 2022 than it was last year, according to Knight Frank’s latest survey.
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This quarter Knight Frank surveyed 50 of England’s leading volume and SME housebuilders to gauge their sentiment and views on the market.
A quarter said they think build costs will ‘increase significantly’ in 2022 compared to 2021, while 67% are expecting a 'slight increase'.
This suggests that while the market is expecting a price increase this year, most expect the high rate of build cost inflation to cool.
Nearly half of respondents to this quarter’s survey said build cost increases last year had already had a ‘significant’ impact on their businesses, while 56% said this was the number one factor adding pressure to their bottom line in Q4 2021.
The Building Cost Information Service, which provides cost and price data for the UK construction industry, is forecasting that build costs will increase annually in January 2022 by 10.2% compared to January 2021 before easing off slightly.
It expects material prices will rise 18.7% in January year-on-year, while labour costs are forecast to increase 2.5% over this time period.
Our survey reflects the particular concern over material costs, with 65% saying that ‘increased cost of materials’ is driving the overall increase in build costs, while only 8% thought build costs were rising due to labour challenges.
Labour shortages in the UK worsened in the final quarter of 2021, with job vacancies hitting a record high of 1.2 million, more than double their level a year before, the Office for National Statistics said. Construction job vacancies stood at 42,000, slightly down from the peak in Q3 of 48,000 but just over 60% higher than Q4 2019, before the impact of the pandemic and the UK’s exit from the European Union.
