Quick answer
Construction materials prices rose 6.4% in the year to August 2026, the fastest annual growth since March 2023, according to BCIS analysis of the official figures, published on 8 October. Materials for new housing were up 5.6%. Fabricated structural steel rose 21.2% and rigid pipes and fittings 15.5%, while imported timber fell 1.6%. BCIS warned that any relief will be temporary while disruption to energy supply continues. For developers, that means checking the cost plan, keeping a realistic contingency and making sure the finance covers the build if prices keep rising.
What the latest figures show
BCIS's analysis of the government's materials price indices for August 2026 shows annual increases of:
- All work: 6.4%, the fastest since March 2023 (8.5%)
- New housing: 5.6%
- Other new work: 7.4%
- Repair and maintenance: 5.9%
By material, fabricated structural steel rose the most, up 21.2%, followed by rigid pipes and fittings, up 15.5%. Imported sawn or planed wood fell 1.6%. In the month, central heating boilers rose 5.2%.
Sam Parkin, senior economist at BCIS, said cost pressures were showing "in areas we would expect", such as steel and energy-intensive or oil-based products, and warned that "any relief will also be temporary as long as conflict-related disruption to energy supply persists".
Less building, but costs still rising
Builders merchants are selling less but charging more. The Builders Merchant Building Index for July, included in the same BCIS release, showed volume sales down 7.6% on a year earlier, with prices up 7.6%. Heavy building materials volumes fell 11.1%.
Activity is still weak. The S&P Global construction PMI for September was 46.1, with housebuilding the weakest sector at 40.7, as reported by PBC Today, and the official figures in our construction output report tell a similar story. Earlier in the year, Knight Frank noted that BCIS forecasts build costs to rise 4.7% in 2026, in its article on the cost of building.
What it means for your appraisal
Development lenders lend against the costs and the end value, so they look hard at the build budget. With materials rising faster than general inflation:
- Update the cost plan. Use current quotes, not last year's rates. Steel frames and plumbing are where prices have moved most.
- Keep a real contingency. Allowances of around 5% to 10% of build costs are common, more for conversions where hidden problems are likely. Our guide to writing a development appraisal shows where it fits.
- Fix what you can. A fixed-price contract moves the cost risk to the contractor, though usually at a higher price.
- Test the margin. If costs rise 5% and values stay flat, does the scheme still work? Our guide to GDV and the development calculators help you check.
Funding a build when costs move
Build costs are released in stages as the work is done, checked by a monitoring surveyor. See how development finance drawdowns work. If costs overrun, the lender will expect you to fund the gap before the next release, so a buffer matters.
For new schemes, ground-up development finance funds the build, and some lenders fund a higher share of costs through stretch senior or mezzanine finance. If a scheme has stalled part way through, finish and exit finance can refinance it and fund the rest. Our development finance page explains the options, and lenders on our panel will look at the cost plan closely, so a well-evidenced budget speeds things up.
Rising costs also change the land price you can pay. If the build costs more and the homes sell for the same, the site is worth less to you, so build the latest prices into any offer. Our guide to residual land value shows the calculation, and land finance covers buying the site before the build starts. When your numbers are ready, Instant Quotes shows which development lenders on our panel fit the scheme.
Common questions
How much have construction materials prices risen?
BCIS reported a 6.4% rise across all work in the year to August 2026, the fastest since March 2023. Materials for new housing were up 5.6%.
Which building materials have risen most?
Fabricated structural steel rose 21.2% in the year to August 2026, and rigid pipes and fittings 15.5%. Imported timber fell 1.6%.
How much contingency do development lenders want?
It varies by lender and scheme, but allowances of around 5% to 10% of build costs are common, with more for conversions and refurbishments.
What happens if build costs overrun on a funded scheme?
Lenders usually expect the developer to fund the overrun before the next drawdown. Some schemes can be restructured or refinanced, but a buffer is the safest plan.
This article reports news and published figures as at 14 October 2026. It is for general information only and is not legal, tax or financial advice. Bridge & Build Finance is a commercial finance brokerage service, not a lender. Finance is subject to status, lender criteria, valuation, underwriting and approval.
