Barker housing targets "unrealistic", report warns

House construction costs will rise by an inflation busting 16% this year and by 11.6% in 2005 with the upwards trend continuing, according to Experian, the global economic forecasting group.

The forecast, contained in its latest Construction Output Price Indicators four year projection model, raises questions about the government’s target for widespread new affordable housing in London and the South East.

“The recent Barker report identifies the need for 70,000 new private and 21,000 new publicly owned homes a year, mainly in London and the South East, but the rising costs of construction are making this ambition unrealistic,” said James Hastings, construction analyst at Experian's business strategies division.

“Increasingly higher rates commanded by skilled labourers like plasterers, plumbers and electricians, combined with escalating costs of brown field reclamation as well as local planning constraints, are rendering new build far less viable.

"The slowing property market, especially in London and the South East, combined with spiralling labour inflation and higher land costs, is effecting a tourniquet on builders’ margins," he said.

“Should demand for additional housing increase further, with extra pressure being exerted on areas of construction where capacity constraints are already starting to show, the situation may worsen for housebuilders."

Inflation in publicly owned housing is slightly more tempered, estimated to be rising at 7% this year and forecast to stabilise at 3 or 4% a year to 2008.