Tender prices for residential construction are falling for the first the time since 2003, according to the Bruce Shaw Handbook 2008.

The report shows that following a period of static prices during 2007 tender prices have reduced; and the handbook predicts that prices will fall by a further 2% to 3% on average because of the increasing space capacity within the industry.

On the other hand, the Bruce Shaw Group report expects construction costs to keep rising at a rate of 3% every year.

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It revealed that labour costs have increased from 1 January this year by 2.5% and details expectations that the cost of materials will continue to rise in line with inflation. Prices for any oil based materials and steel will rise even faster reflecting global demand, it claimed.

Some imported materials, in contrast, will benefit from the current strength of the Euro in comparison to the pound sterling and the US dollar.

In the long term, the report suggests that, tender prices will rise having adjusted to a downturn in residential construction and housing completions will return to a sustainable annual level.

Once this has occurred, the group predict that tender prices and material costs will rise in tandem.

(VB/JM)