North boom bumps up build costs

A study by the firm on regional inflation and markets across England and Scotland for QS News found that the demand for housing and flats, especially high-rise towers, had led to the jump in costs over the last year.

The figures found that typical build costs had gone up from £88 to £100/ft2 off the back of increased average selling prices, which had jumped around 10% from £205 to £230/ft2.

Gleeds said this inflation had caused contractors in the region to turn work away as they were unable to cope with the amount of work. Yet despite this increase in demand the study said that several contractors were pulling out of the market as they had lost money on individual schemes.

The study found that inflation in the regions had stabilised somewhat after higher than average increases in 2004.

Forecasting in the current climate is presenting a greater challenge for us all

Ross Savage, partner, Gleeds

These were caused largely by massive jumps in material prices such as steel.

The highest increase in inflation for 2005 is set to be the North East where prices are likely to go up 6%. This will be down some percentage points from 2004 where inflation stood at 8-10%. Gleeds claimed that the London and the South East region remained fairly stable and that the market was gearing up for an increase in the commercial sector in 2007.

Ross Savage, partner at Gleeds, said the figures showed how unpredictable the construction market was performing across different regions. He said: “It is very difficult to therefore refer to UK PLC as a whole in economic terms without breaking down data into different areas of the country. One thing is certain and that is that forecasting in the current climate is presenting a greater challenge for us all.”