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New Housing Construction Costs Rise 3.9% in July

  • Redação Mudei e Agora
  • Aug 11
  • 2 min read

The construction sector in Portugal recorded a 3.9% increase in costs for new housing construction in July 2025 compared to the same month last year, according to data released by the National Statistics Institute (INE). This rise is slightly higher than previous months, reflecting ongoing pressure on materials and labor costs.


Key components driving the increase

INE explains that the growth was mainly driven by:

  • Materials costs, which rose by 2.8%;

  • Labor costs, which increased by 5.4%.

This data shows that although some construction material prices have stabilized after peaks between 2021 and 2023, wage increases for construction workers remain one of the main factors pushing overall costs up.


Why labor costs weigh heavily

The construction labor market faces a chronic shortage of skilled professionals, such as masons, carpenters, electricians, and technicians specialized in energy efficiency. With high demand and limited supply, companies are forced to raise wages to attract and retain workers, directly impacting the final cost of projects.

Additionally, strong competition for labor from other European countries worsens the situation. Many Portuguese workers migrate to countries like France, Luxembourg, or Belgium, where wages can be significantly higher.


Impact on housing prices

Rising construction costs tend to be passed on to property sale and rental prices. Real estate developers warn that without cost containment measures or tax incentives, prices for new residential projects could increase between 5% and 8% by the end of 2025.

For buyers, this adds pressure in a context where interest rates, although declining, remain above historic lows. Renters may face less availability of affordable new housing.


Historical perspective

Between 2020 and 2022, construction costs surged over 20% due to the pandemic, supply chain disruptions, and sharp rises in raw materials such as steel, wood, and concrete. In 2023 and 2024, growth slowed, but current increases indicate the sector hasn’t fully returned to pre-COVID normalcy.


Sustainability and new requirements

Another cost factor is growing energy efficiency and environmental certification requirements, such as BREEAM or LEED. While these raise the long-term value of properties and reduce operational costs, they require higher upfront investment from builders.


Possible solutions

Experts suggest three main strategies to mitigate rising costs:

  1. Professional training to increase the skilled labor supply;

  2. Tax incentives for builders using sustainable and innovative materials;

  3. Public-private partnerships to promote affordable housing without sacrificing quality.


Outlook for the rest of 2025

Costs are expected to remain high but with moderate growth — between 3% and 4% through the end of the year. This will depend on stability in international raw material prices and the ability to attract skilled labor.

Investors and buyers should monitor these indicators closely to determine the best time for projects or purchases.


Source: National Statistics Institute (INE) / Jornal Económico



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