Construction inflation has softened over the past year and building costs are forecast to rise by around 3% in 2024. However, the risk of underinsurance remains incredibly high, says RebuildCostASSESSMENT.com.
In May 2022, construction inflation rose to a record rate of 10.4%, according to the Office for National Statistics (ONS). A little over one year later this rate had fallen to less than 5%, and now BCIS is predicting building costs will rise by just over 3% by the fourth quarter of 2024. So, what does all this mean for rebuilding costs and the threat of underinsurance?
“In many respects, it’s good news,” said Liz James MRICS, Surveyor at RebuildCostASSESSMENT.com. “ However, it’s also worth recognising that while the steep rises we’ve seen in recent years have settled down, costs continue to go up.”
“It is also important to note that these figures only represent the bigger picture around construction costs. So, for example, while building materials inflation has cooled overall last year, we have still seen costs for elements such as insulating materials, metal doors and windows and ready-mixed concrete rising by around 20%.”
“How a building is constructed remains a big factor and we cannot simply say that costs have stabilised for all types of property.”
The gap has widened
Liz went on to say that regardless of what’s been happening recently with construction inflation, the risk of underinsurance remains high, according to RebuildCostASSESSMENT.com’s unique data.
“We continue to find that around 4 out of every 5 properties assessed by us, in the UK are underinsured. Our findings also demonstrate that high inflation in recent years has caused the gap to significantly widen between what buildings are insured for, and their rebuild cost.”
“In 2021, buildings were on average covered for 68% of the amount they should have been. Last year we found they were covered for just 63% of the quantified rebuild cost. The risk of exposure to underinsurance has never been greater. Taking a property with a rebuild cost of £4.5m, this widening gap on average amounts to £225,000, with an overall shortfall of almost £1.7m.”
The most reliable way of ensuring any building is insured for the right amount is to have the rebuild cost professionally assessed. Thankfully at RebuildCostASSESSMENT.com, we’ve made these assessments more affordable and easier to arrange in recent times, and we continue to find ways of bringing our service to even more property owners through remote, as well as site valuations.