Rising building costs threatens afforable housing, says Experian

House construction costs, which will rise by almost seven times the rate of inflation this year, could seriously impede affordable housing targets, according to Experian.

The company's Construction Output Price Indicators four-year projection model found that building costs will increase by 16% this year, and by 11.6% in 2005 - with the trend continuing steadily upwards after that.

This alarming inflation rate is likely to have serious ramifications for builders’ ability – or inclination – to meet the ambitious targets for widespread new affordable housing in London and the South East, Experian said.

“The recent Barker report identifies the need for 70,000 new private and 21,000 new publicly owned homes a year, mainly in London and the South East, but the rising costs of construction are making this ambition unrealistic,” said James Hastings, construction analyst at Experian's Business Strategies division.

“Increasingly higher rates commanded by skilled labourers like plasterers, plumbers and electricians, combined with escalating costs of brown field reclamation as well as local planning constraints, are rendering new build far less viable. The slowing property market, especially in London and the South East, combined with spiralling labour inflation and higher land costs, is effecting a tourniquet on builders’ margins."

Inflation in publicly owned housing is slightly more tempered, rising at 7% this year and forecast to stabilise at 3-4% a year to 2008.

(gmcg/sp)