This article is an update to the original that we wrote in early 2024. In that time, a lot has changed in the world, and the property market in particular. For example, we’ve since had a General Election and a new Labour Government, several budgets, and a pledge to build 1.5m new homes in the UK.
So with that in mind, we’ve revisited it to understand what’s changed, and what might happen to the cost of building materials in 2026 and beyond.
Undeniably, the last few years have been tough on the construction industry. COVID, the War in Ukraine, climate change, US tariffs, and the wider cost-of-living crisis have all significantly contributed to rising material costs. Property developers, large and small, across the UK and the South East have felt the knock-on effects for years now.
While inflation is not as rampant as it was in 2022 and 2023, the economic outlook is still unpredictable.
Will Construction Costs Fall in 2026 and 2027?
No. Probably not.
According to the Building Cost Information Service (BCIS) five-year forecasts, building material costs are expected to rise by between 2.5% and 3.5% across 2026. While this is a big reduction compared to the double-digit inflation seen in 2022/3, it is still above the 2% target set by the Bank of England.
As a result, it’s expected that the total cost of building will increase by 15% by 2030, and tender prices will rise by 16% over the same period. While material cost rises may be modest, increasing demand and rising labour costs are the driving factors.
For example, increases to employers’ National Insurance Contributions and the adoption of the National Living Wage have pushed up prices. Additionally, according to Dr David Crosthwaite, Chief Economist at BCIS, skills shortages remain a problem in the UK, exacerbating the problem.
The Materials to Watch
Steel & Cement
According to PBC Today, prices for steel and cement will remain vulnerable to global energy prices and demand. With ongoing disputes between the US and China, and demand increasing for green alternatives (such as low-carbon concrete), builders will need to add contingency to their materials budgets.
Timber
Like steel and concrete, timber could be subject to demand and price fluctuations over the coming year. While the UK imports most of its timber from Scandinavia, trade disputes between the US and Canada, and the US and China, could also impact global prices.
Timber is also (rightly) seen as a more sustainable alternative to other building materials in many cases, and a push from developers to reach green targets could further increase demand for wood imports, raising prices in the process.
Insulation
As new EPC rules for landlords come into effect, and homeowners look to improve their properties, the cost of insulation and other specialist products is expected to remain high through 2026 and beyond.
Green Tech
One area that is expected to improve over the coming year or so is green technology. While the Future Homes Standard regulations in 2027 will stipulate that all new builds in the UK must have solar panels, there is still a glut of panels on the market.
This means that developers can pick up cheap, but high-quality solar products for less. So, if you’re planning a new development any time soon, it may be worth sourcing panels now.
Property Development Finance in The South East
At Hunter Finance, we’ve worked with developers of all sizes across the South East to provide funding for a wide range of successful products. We’re always eager to work with new clients, and can often provide an agreement in principle within 7 days. Contact us today to find out more.
