New Home Construction Costs in Portugal Rise by 3.7%, Driven by Labor

Why Are New Apartments in Lisbon So Expensive? Construction Costs Jump 3.7%

For investors eyeing new-build properties in Portugal, a key question is why prices remain so high. The latest data from the National Statistics Institute (INE) provides a clear answer: the cost to build is surging, primarily driven by a massive 6.8% annual increase in labor costs.

The overall construction cost index rose by 3.7% in May, a significant figure that directly impacts the sale price of new homes. While material costs have seen only a slight 1.1% increase, the shortage of skilled labor is the real issue. "The cost of labor was the main driver, contributing 3.1 percentage points to the total index increase," a construction sector analyst confirmed. This means that developers are paying much more for workers, a cost that is inevitably passed on to the final buyer. This trend makes newly built properties inherently more expensive and solidifies the investment value of high-quality renovated apartments.

• Compare New vs. Renovated: When evaluating properties, carefully compare the price per square meter of new builds against recently renovated apartments in the same Lisbon neighborhood. The value proposition may be better with the latter.
• Invest in Quality Developers: For new constructions, partner with reputable developers who have a track record of managing costs and delivering high-quality projects on time.
• Look at Pre-Construction Deals: Buying off-plan can sometimes offer a better price point, as developers are keen to secure early sales to finance the project.
• Consider the 'Labor Premium': Understand that you are paying a premium for new construction that is directly linked to the high cost of labor. Ensure the quality, location, and amenities justify this premium.

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