Rebuild costs for UK houses and flats rose by an average of 4.9% in the year to January 2026, up from 3.8% the previous year, according to the annual update to residential rebuild cost models from the Building Cost Information Service.
Since January, the ABI/BCIS House Rebuilding Cost Index, which tracks cost movement between full model updates, has recorded a further 3.7% rise, meaning any sums insured left unadjusted since the last review are likely falling further behind actual rebuilding costs.
The rise was not evenly distributed across cost elements. Cos Kamasho, principal consultant at BCIS, said an average increase of 4.9% represented a sustained rise on the previous year, with kitchens and sanitaryware climbing 7.8% and 9.4% respectively, and aluminium and uPVC windows rising between 5.5% and 7.5%, both well above the headline figure.
Labour has been the dominant driver of rebuild cost inflation for several years, particularly following increases to employer National Insurance contributions and the National Living Wage.
This year's update suggests materials costs are catching up, adding a second source of pressure rather than replacing the first.
The update lands as Brent crude, the international benchmark for oil prices, broke back above $100 a barrel at the end of July for the first time since May, following the breakdown of the US-Iran ceasefire and renewed disruption to Middle East shipping routes. Oil is a key input for fuel and for energy-intensive construction materials used in reinstatement work.
Kamasho said materials costs had picked up in recent months due to the effects of conflict in the Middle East, with oil prices moving sharply again after the ceasefire between the US and Iran broke down. He added that construction is particularly exposed to energy supply shocks given its reliance on fuel for transporting labour and materials, running site plant, and producing energy-intensive raw materials, noting that reinstatement work in particular depends on plant and machinery for demolition and site clearance, so movements of this kind can feed directly into rebuild costs.
The timing compounds pressure that is already building elsewhere in the property market. The Association of British Insurers recorded £307 million in UK subsidence payouts across 2025, an all-time high, with the average settled subsidence claim reaching £17,820 in the first quarter of 2026, up 9% year on year.
BCIS itself has warned separately that rising drought frequency is widening the underinsurance gap further, since claims triggered by ground movement often expose sums insured that have not kept pace with actual rebuilding costs.
For brokers, the combination is a practical argument for requesting updated rebuild-cost data at renewal rather than relying on index-linking alone, particularly for properties that have not had a full reinstatement cost assessment in several years.
Aviva's most recent Broker Barometer research found two-thirds of UK commercial properties underinsured, with an average gap of 79% between sums insured and estimated rebuild cost, a pattern that leaves policyholders exposed precisely when claims costs are climbing fastest.
BCIS said its rebuild models are also updated to reflect new legislation and regulatory requirements, including changes associated with Part L energy efficiency regulations and the forthcoming Future Homes Standard.
Both are likely to push reinstatement costs higher over time regardless of materials or labour pricing, since a home rebuilt after a total loss must generally meet current building regulations rather than simply replicate what existed before.
Two pressures are now moving in the same direction at once. Materials costs, which had been the secondary concern behind labour for several years, are reasserting themselves just as an external oil price shock threatens to push them higher still.
For an industry already absorbing record subsidence payouts and a widening underinsurance gap, a rebuild cost increase that outpaces last year's by more than a full percentage point is not a technical footnote. It is a reminder that a sum insured fixed even twelve months ago may already be materially adrift from what a genuine total loss would actually cost to put right.
