The private housebuilders in the UK are under pressure, as the construction costs increased by over 4 per cent during the last quarter of 2016. This is likely to impact the house prices while demand continues to outstrip supply.

The BCIS Private Housing Construction Price Index rose 1.5 per cent in the latest quarter (Oct-Dec 2016), according to the Royal Institution of Chartered Surveyors (RICS). The increase in cost pressure is attributed to building materials such as bricks, blocks and appliances (impact of exchange rates on imported prices). Shortage in skilled roof tilers, bricklayers and scaffolders also contributed to growth in housebuilding costs.

Contractors surveyed by the RICS expected the costs to continue to rise into the first quarter of 2017 by 1.5 per cent. This gives a clear indication of the housing market in the UK. The house prices are automatically adjusted against the cost of construction.

The Private Housing Construction Price Index is based on housebuilders' costs in constructing a standard house. The latest quarter is based on contractors’ expectations; the Tender Price Index is based on rates in accepted tenders while the General Building Cost Index is based on factory gate prices for materials and nationally agreed wage awards.