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Construction costs in the UK - statistics & facts
Even though the inflation rate in the United Kingdom has started coming down in late 2023 and in 2024, construction costs have remained a major issue industry. That is not only because construction costs were still high, but also because it is important to be able to estimate them correctly to make profit in any given project. There are several types of expenses that contractors need to consider when starting any project. Some of the most relevant ones are the price of raw materials, fixtures and fittings, and equipment, but also labor costs, and the price of development land.
Dealing with and estimating construction costs is a major challenge for contractors and developers starting any project in the United Kingdom. That is particularly the case in London, as the capital has some of the highest building prices in the world.
Why do construction costs increase?
In the past years, the industry has faced several challenges that have constrained the building activity of the UK and caused some of the aforementioned expenses to increase. Firstly, after the start of the COVID-19 pandemic there were supply-chain disruptions, which caused shortages of construction materials. When supply decreases, but demand remains stable, prices tend rise. Additionally, there has also been a shortage of skilled labor, with the number of job vacancies in the construction sector reaching a peak in 2022. The number of vacancies has decreased in 2023 and 2024, but those figures remained overall high. The inflation seen in the economy as a whole has had a big impact on the industry overall, with the annual growth rate of construction costs, which remained over five percent between October 2021 and May 2023. Nevertheless, many of those factors have started to cool off since then, and as a consequence that growth rate was much lower in 2024.Construction costs worldwide
Some of the most affordable cities to construct a high rise were located in China, Southeast Asia, and South Africa. New York was on the other side of the spectrum, closely followed by London, Sydney, and Hong Kong. There were also other cities in the U.S. with very high residential construction costs, such as Honolulu and San Francisco. The latter was in fact the U.S. city at the top of the ranking for multi-family housing, with an average expense of 513 U.S. dollars per square foot. Along with the entries above, Switzerland was also a really expensive place to build in: Geneva and Zurich were the two cities with the highest construction costs in Europe. London was the third city in that ranking, with a figure just below 4,000 U.S. dollars per square meter.Dealing with and estimating construction costs is a major challenge for contractors and developers starting any project in the United Kingdom. That is particularly the case in London, as the capital has some of the highest building prices in the world.
