Construction prices rise in 2007 despite credit crunch

Construction prices continued to rise throughout 2007 despite the credit crunch, according to consultant Davis Langdon’s latest market forecast.

The report found that prices in Greater London rose by 6% last year, exceeded by some micro-markets such as City office development.

Prices rose by between 5% and 6% in other parts of the country.

Peter Fordham, associate at Davis Langdon and author of the report, said: “The office market appears to have peaked and funding for speculative developments will be harder to come by.

“The retail market is likely to cut back development.

“The private housing sector will reduce owing to few buyers and the buy-to-let market will shrink rapidly.”

The firm forecasts a rise in construction materials prices in 2008 due to the decline in the value of the pound with imports accounting for 25% of all materials and components used in the construction industry.

Construction prices are forecast to rise by 4% to 7% during 2008 and between 4% to 6% in 2009.

On a more positive note, public sector spending is expected to rise with the industry benefiting from an additional £2bn a year from expenditure on schools.

In particular, the report found, there will be an acceleration of the Building Schools for the Future programme.