The housebuilding target will be missed. From the cost side, that is not the good news it sounds like

There is a comfortable assumption that a slower market means keener prices. It is worth testing, because the last two years have not behaved in that way.

The published position is not in much doubt. Between July 2024 and June 2026 around 392,400 net additional homes were delivered in England, roughly a quarter of the 1.5 million target, against a stated requirement of about 370,000 a year. The 2024/25 figure was 208,600, itself down on the 221,410 the year before. The direction is the wrong one.

That is the politics, and others can write about it. The question for anyone appraising a scheme is narrower. If fewer homes are being built, should you expect to buy construction more cheaply?

Volume and unit cost are not as connected as people think

The reasoning behind the assumption is sound enough in a normal market. Less work, more competition, lower prices. It has not been holding, for two reasons.

The first is that the constraint is not land or demand, it is capacity. Skilled trades that left the industry during the last downturn have not come back, and the ones that remain are older. A trade that is short of people does not get cheaper when there is 5% less work, because the shortage is bigger than the fall in demand.

The second is that contractors have spent three years being selective rather than competitive. BCIS puts tender prices rising faster than building costs over the next five years, which is margin recovery, not cost inflation. A quieter market is producing fewer bidders per tender, not keener ones, and a two-tender competition is not a competition.

What it means for a scheme you are appraising

Do not take a discount for a soft market that has not shown up in returns. What a slower market genuinely gives you is time, and time is worth something: a longer tender period, a proper mid-tender query process, and the chance to get the design finished before going out, all of which reduce price more reliably than hoping for a hungry contractor.

Contractors have certainly become more selective in the projects they will tender for. We have witnessed up to 50% of those invited to tender withdrawing at some point during the tender process. Various reasons are given, such as their capacity to tender, the cost involved in the tender process, not feeling the design and tender documents are sufficiently developed to provide a fixed price and therefore not being willing to take the risk, or an expectation that they would not be competitive on price. Those tenders we have received have been slightly above expectations on the total, but there has been consistency. One tender for a £12m project had a range of only £150,000 between the highest and the lowest return, with key rates being similar. This perhaps in turn indicates a shortage of subcontractors willing to price for main contractors, meaning it is not the rates which win a project, but the margin and the level of preliminaries.

The firms that will do well in the next two years are the ones that arrive at tender with a finished design and a realistic budget. That has always been true. A tighter market simply removes the room to be wrong.

What this means for your scheme

• Do not build a market discount into an appraisal on the strength of national output figures.

• Count your tender returns, not your tender list. Three real prices beat six invitations.

• Use the time a slower market gives you to finish the design before tendering. That is where the saving is.

• Watch the trades with the deepest labour shortages. They will not follow the market down.

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Sources. Net additional dwellings figures as tracked by Full Fact against the government target, June 2026. BCIS five-year forecast, June 2026. Where this piece responds to published commentary, that commentary is linked rather than reproduced.