Building materials prices see seventh consecutive monthly decline

Building materials prices declined by 1.6% annually in January as the construction sector showed a seventh consecutive month of declining prices, according to government figures.

However, despite this decline the continued shortage of key construction materials caused construction output to decline by 1.3% with "New Housing" work decline by 0.5%.

A survey of builders nationwide revealed due to a decrease in inquiries for new work and rising costs, mainly caused by rising interest rates and declining product availability, they have been forced to reduce their staff and raise prices for their work.

Here we take a look at the latest updates and statistics to see how it might affect how much it costs to build a house.

Building materials prices decline further

The construction industry experienced a 1.6% year-on-year decline in construction costs in January 2024, according to the Building Materials and Components Statistics.

The cost of building 'New Housing' in January saw a decline from December of 0.5% whilst 'Repair & Maintenance' costs also declined 0.5%, representing the seventh consecutive decline in building material costs.

However, key construction materials have still seen rising costs with deliveries of key materials suffering severe shortages causing a decline in sales and construction output.

Brick and block deliveries continued their decline in sales with a 15.7% decline in sales in blocks from December 2023 to January 2024 and 8.6% decline in brick sales over the same period.

This follows an annual decline in sales in 2023 with December sale figures revealing a 32.5% drop for bricks and a staggering 41.6% decline in block deliveries, representing even further declines than those seen in August with the sector not recovering from the decline in deliveries seen in 2020 during Covid lockdown.

Sales of sand & gravel decreased by 0.7% in Q4 2023 compared to Q3 of 2023 representing a 15% annual decrease from Q4 of December 2022.

Ready-mixed concrete sales decreased by 3.1% in Q4 2023 compared to Q3 2023, representing an annual 8.1% decline.

Homebuilding construction down 30% in some areas

Construction output is decreasing, primarily due to a decline in new housing, according to the Bank of England's Agents’ Summary of Business Conditions for December.

Private and social house-building activities have slowed down, especially in some areas where there's a 30% decline, which has been attributed to an increase in mortgage rates and declining self build mortgage options.

It was also found that there was a growing problem of construction firms "failing" that led to delays in projects.

Although, whilst construction in new housing is slowing, repair and maintenance work is compensating for some of the decrease and there is an expectation that the situation will stabilise in 2024.

How else could your project be affected?

The Federation of Master Builders (FMB) State of Trade Survey has revealed builders have experienced a decline in demand for their services.

In the fourth quarter of 2023, 63% of members noted a rise in material costs, a slight decrease from the previous quarter's 71%. The resulting financial strain has prompted 66% of members to raise their prices.

However, nearly half of respondents expressed concerns about potential losses or falling below expected profit margins. Additionally, one in five members stated that they are limiting new staff hires due to increased expenditures.

In the private housing sector, there are signs of a cooling housing market as new inquiries decrease and house prices drop and the housing sector faced a sharp decline of 14.9% in 2023, but is projected to recover with a 5.5% increase in 2024 and a 7.0% increase in 2025. 

Additionally, government support programs have been scaled back, and economic uncertainties are discouraging private housebuilders from taking on new construction projects with "enthusiasm" in the Building Materials and Components analysis for 2024.

The State of Trade Survey also revealed a slight improvement in recruitment challenges, but a significant portion of members still face difficulties.

Over a quarter of respondents noted a decrease in their number of employees. Specifically, 36% of members are finding it challenging to recruit carpenters, while 34% are encountering similar issues with hiring bricklayers.

Around a quarter of respondents also reported difficulties in hiring general labourers whilst nearly half of FMB members stated that project delays are occurring due to struggles in hiring skilled workers.

This is corroborated by the ONS who reported that 25% of construction businesses in the UK were experiencing skilled labour shortages.

There are roughly now 244,000 fewer workers in the construction sector compared to three years ago, the ONS says, attributable to workers returning to the EU and early retirees. 

This shortage is particularly affecting SME (small and medium-sized enterprises) builders since it can take a minimum of three years to train up a skilled tradesperson. 

Tim Balcon, CEO of the Construction Industry Training Board (CITB), claimed: "The greatest challenge UK construction faces over the next five years is recruiting the number of people required to fill the growing number of vacancies."

How to navigate price fluctuations

If you’re planning or in the middle of building work, then planning as far as you can in advance is pivotal to ensure you aren’t caught out by price rises.

The CLC advises self builders to work closely with their supply chain and communicate your requirements early with suppliers, distributors and builders merchants.  

Builder and Homebuilding & Renovating Show speaker and expert Andy Stevens offers the following advice: "There will be material price rises so you need to work closely with your builder and budget for these. 

"It’s so hard to predict accurately because of the volatility of the market, but make sure you work closely with your builder as we are in the merchants all the time and hear about price changes before anyone."

Andy Stevens

Andy Stevens, an award-winning builder and owner of Surrey's Eclipse Property Solutions, specialises in new builds, extensions, and loft conversions. Apart from hands-on work, he's an active figure in the construction sector serving on the Board of the Federation of Master Builders and was formerly Vice President. He also supports construction-related charities and advocates for mental health awareness within the industry.