Material and labour costs to fall for first time since 1970

The year-on-year costs of building materials and labour are set to fall for the first time since records began 39 years ago, according to exclusive research for Building magazine.

Davis Langdon’s latest forecast in this week’s issue says material and labour costs had been rising, with an increase of 3.8% in the second quarter of 2009.

However, associate Peter Fordham said its Building Cost Index would “almost certainly” turn negative next quarter. He said material prices had been falling since the end of last year and that the effects of June’s pay freeze for building and civils workers would be evident next quarter, leading to negative data for the first time since at least 1970.

Tender prices fell 1.5% in the second quarter of 2009 and are 10% lower than this time last year, with a further fall of 7-9% expected by next June. Fordham said some sectors had been particularly affected. He said: “We’ve seen some competitive steel prices and concrete is beginning to follow suit.” Steel packages have fallen by up to 40% over the year.

The forecast says M&E packages are falling quickly, having held up well until the end of last year. Fordham also raised fears of a “double-dip” recession, adding that there was evidence that price falls had accelerated at the end of June and continued in July. He said: “Things seem to have fallen off a second cliff recently.”

The report comes despite some signs of increasing confidence in the construction industry. The NHBC said this week that the number of home started in June was the highest in almost a year.

Rider Levett Bucknall has just published its international tender price forecast, which predicts that prices will fall by 7-8% in the UK during 2009 and 12% in the USA.