Portuguese residents looking to build a new home now face the highest costs in over two years. In July, new home construction costs increased 4.8% year-over-year, representing the highest value since March 2023, according to the latest data from the New Housing Construction Cost Index (ICCHN), released by the National Institute of Statistics.
This worsening comes at a time when the construction sector was already facing significant pressure, with soaring prices driven by two main factors: construction materials, which recorded a 1.5% annual increase—also the highest value since March 2023—and, primarily, labour, whose costs soared 8.9%, reaching their highest peak since October 2024, according to a report by ECO.
The labour component continues to be the main driver of rising housing costs. "Labour costs contributed 4 percentage points (3.4 percentage points in the previous month) to the annual variation rate of the ICCHN," the INE document reveals. This inflationary pressure on the cost of specialized labour reflects not only wage increases in the sector but also the shortage of qualified professionals.
In contrast, materials showed a more moderate contribution, registering "a contribution of 0.8 percentage points (0.5 percentage points in June)" to the total cost variation. This dynamic suggests that, although material prices have begun to accelerate, the main source of cost pressure continues to be the human component of construction.
Beyond the annual outlook, the monthly trend also shows signs of an acceleration in new construction costs. "The monthly rate of change in the ICCHN was 0.7% in July 2025, 0.3 percentage points higher than that recorded in the previous month," says the INE. This month-over-month acceleration indicates that inflationary pressures in the construction sector may be intensifying.
The document also reveals that, sequentially, "the cost of materials and labour rose 0.3% and 1.1%, respectively" in July, compared to the previous month, demonstrating that the labour component maintains the steepest growth rate also in the monthly comparison.
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And what about opportunistic profit taking by construction companies? Somehow I don’t believe they have increased their employees wages by 4% over the same period! Same old situation, viral marketing, tourism, influencers, tax breaks, excess (taxable) wealth in more developed countries creating investing opportunities (while local communities suffer shortages) driving unrealistic growth in one sector. Where is the government regulation on this, non primary residences, purchases in corporate names, rentals?
By Stuart Wood from Algarve on 13 Sep 2025, 09:56
Unfortunately, the percentages do not tell you how much it costs to build. What readers are interested in is what it actually costs to build, in different parts of the country. Could you please do a piece on the cost of construction in different parts of Portugal. In the same way that several articles this year have told you what it costs to buy a home.
By JJussi from Algarve on 13 Sep 2025, 14:21