Building material prices stable amid sluggish construction market

Building material prices have remained steady, but this stability is largely said to be due to a decline in demand amid a sluggish construction market.

Government statistics reveal that the sector has experienced reduced activity, a trend expected to persist throughout 2024.

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.

2024 sees a decline in construction output

The Bank of England reported that the decline in construction output is slowing, with a less than positive outlook for the rest of the year.

Private housebuilding remains below last year's levels, and public sector projects are limited by budget constraints, although it was revealed that smaller housebuilders performed better in Q2 than Q1 in 2024.

Forecasts from experts like Experian and the Construction Products Association suggest that 2024 will be difficult, with declines expected before a potential recovery in 2025 and 2026.

The Office for National Statistics also reported a small decrease in construction output in the second quarter of 2024, mainly due to a drop in new work, despite some growth in repair and maintenance.

'Demand remaining subdued across most sectors'

John Newcomb, CEO of the Builders Merchants Federation, and Peter Caplehorn, CEO of the Construction Products Association, co-chairs of the Construction Leadership Council’s Material Supply Chain Group, noted that while product availability is currently good this is mainly due to subdued demand across most sectors.

In a joint statement they said: “Meeting in the wake of the King’s Speech, the group welcomed the new government’s planning reforms, but wants to see further details and specific plans to boost housing and construction and stimulate key sectors of the industry.

"Currently there are good levels of product availability across the board, but this is a direct result of demand remaining subdued across most sectors.

"It is difficult to see the market improving before the turn of the year, and suppliers have adjusted capacity to meet current demand."

They also revealed there were "concerns" about a "shortage of labour, particularly in areas requiring new skills, such as the installation of heat pumps," which is predicted to be "further exacerbated when construction activity increases".

Brick and block deliveries continue their downward trend

Brick deliveries in June 2024 decreased by 12.9% compared to June 2023, continuing a downward trend that has been ongoing since 2022, according to the government's Building Materials and Components Statistics.

Despite a slight improvement from May to June 2024, the overall decline is part of a broader trend following years of growth that was only interrupted by the COVID-19 pandemic and the recession of 2008-2009.

Similarly, block deliveries fell by 9.8% in June 2024 compared to the previous year. While there was a small increase in deliveries from May to June 2024, the general trend has been a steady decline since 2021, reflecting broader economic challenges.

Material prices have shown fluctuations, with an overall decrease of 0.9% in June 2024 compared to the same month in 2023. Specific sectors such as new housing and repair and maintenance saw slight price increases, while prices for other new work continued to fall.

How else could your project be affected?

The Bank of England did announce a reduction for the first time since March 2020, with the rate now set at 5%, down from 5.25%.

The bank rate is tied to interest rates charged by banks for mortgages, which have now seen a reduction with the current average mortgage rate for a five-year fixed-rate mortgage down to 4.8% and the current average rate for a two-year fixed-rate mortgage down to 5.18%.

Self build mortgages have also seen a reduction as Buckinghamshire Building Society has lowered the interest rate to 6.49% and doubled the maximum loan limit to £1 million.

With a more competitive mortgages market it is expected for there to be a steady rise in house prices for the remainder of the year.