Here's what the Iran War is actually doing to build costs

Most of them are worried. Some have paused. A few have stopped altogether. And I understand why. The closure of the Strait of Hormuz sent energy markets into a spin, and when energy moves, construction costs follow. That much is true.

But here is what I keep telling people. The picture is not as uniform as the headlines suggest. Yes, some materials are getting more expensive. But others are not moving at all. And in some parts of the market, conditions are actually getting easier. If you are making big decisions based on fear alone right now, you are probably leaving money on the table.

Steel is surging, and too many developers are not ready for it

Steel is taking a hit. It is one of the most energy-intensive materials, and with oil surging past $100 a barrel almost overnight, the cost of producing it has jumped. I am also seeing freight costs climb, which means even stock sitting in UK warehouses is being repriced. Quotes from January are not worth much today.

Cement and concrete are moving in the same direction. Cement kilns burn enormous amounts of gas. When gas prices rise, manufacturers pass it on quickly. Industry analysts are warning this could permanently reset price baselines rather than bounce back after a ceasefire. That is the bit people are not taking seriously enough.

Copper is an interesting one. Many people do not realise the Gulf is a major supplier of sulphur, which is essential for processing copper ore. With that supply under pressure, the cost of wiring, pipework and fittings is creeping up in ways that are not obviously connected to the war but very much are.

Insulation, PVC, plastics. All petrochemical-based. All moving. The Construction Products Association has estimated that if oil stays above $100 for four months, we could see material costs rise a further 14 to 16 per cent on top of a baseline that is already around 37 per cent higher than 2020. That is not a blip. That is a new reality to plan around.

Timber has not moved, and that changes the calculation for a lot of schemes

This is the part of the conversation I enjoy having, because it is where the opportunity sits.

Timber is holding. It is not as energy-intensive to produce, it is not tied to Gulf supply chains, and most of it comes from domestic or Scandinavian sources that are largely untouched by what is happening in the Middle East. I have been saying for a while that timber-frame construction makes sense for a lot of schemes. Right now, it makes even more sense.

Labour is also softening. I know that sounds counterintuitive when everyone is talking about rising costs, but private housing output was already falling before the war started. Schemes are being paused. Subcontractors and specialist trades that were booked solid eighteen months ago are becoming available again. In some regions, I am seeing more competitive pricing from trades than at any point in the last two years.

Land is probably the most interesting one. The spring market that sellers were banking on has not materialised. Competing developers are stepping back. I have been in conversations recently where there is genuine room to negotiate on acquisitions that six months ago were completely take-it-or-leave-it. That does not happen often. When it does, you pay attention.

Smaller developers are most exposed, but they are not powerless

If you are a smaller developer, you are most exposed right now. You cannot buy materials in bulk, hedge costs, or maintain thinner buffers. My honest advice is to build a 15 per cent contingency into every live budget, not the usual five, and go through every fixed-price assumption with fresh eyes. Some of those numbers will not hold.

If you are a medium-sized developer, I think you are in the most interesting position in the market. You have enough scale to move with some leverage, but enough agility to make decisions quickly. The developers I am watching closely right now are the ones using this moment to acquire land at better prices, lock in subcontractors while they are available, and push forward on schemes that competitors have quietly shelved. If you are a larger housebuilder or institutional developer, you have the balance sheet to absorb this better than most. But size can also make you slow. The market is repricing fast, and the advantage right now belongs to people who can act quickly.

The developers who keep moving through this will look very smart in 18 months

I have been doing this long enough to know that the developers who build real wealth through market disruption are never the ones who stop. They are the ones who understood what was actually happening while everyone else reacted to what they read in the news.

The Iran War is not a reason to stop developing. It is a reason to be more precise about how you develop. Choose materials with stable supply chains. Design schemes that are less energy-intensive to build. Buy land at prices that reflect today's reality, not last year's optimism.

The fundamentals have not changed. The UK still has a chronic shortage of homes. The government still has a target of 1.5 million new builds. Long-term demand is still there underneath all of this noise.

The developers who are quietly positioning themselves right now will look very smart in 18 months. I would rather be one of them than one of the people who waited.

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Jon Allen MCIOB is Projects Director at Devstra, a specialist consultancy supporting property developers across the UK from site appraisal through to delivery and exit.

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