New Home Construction Costs in Portugal Accelerate to 4.8% in July
The cost of new residential construction in Portugal registered a year-over-year increase of 4.8% in July, an acceleration of 0.9 percentage points compared to the rate recorded in June. The data, released this Monday by the National Statistics Institute (INE), points to the rising cost of labor as the main driver of this upward trend.
According to the New Housing Construction Cost Index (ICCHN), the price of labor saw a significant annual increase of 8.9%, a figure that heavily influenced the overall index. In contrast, the cost of materials experienced a more moderate monthly rise of 0.3%. The overall monthly variation in construction costs was 0.7% in July, which is 0.3 percentage points higher than the figure for the previous month.
The INE bulletin details that the increase in material costs was influenced by rising prices for specific items. Glass and mirrors saw a price hike of approximately 30%, while air conditioning units increased by about 15%. These increases were partially offset by a reduction in the price of other materials. Notably, mild and galvanized steel sheets became around 15% cheaper, and steel and cast iron pipes saw prices fall by about 10%.
This acceleration in construction costs comes at a time of high activity in the Portuguese real estate market, where demand continues to outstrip the supply of new housing. The data from INE provides a quantitative look at the inflationary pressures facing developers and builders across the country. The pronounced increase in labor costs reflects ongoing challenges in the sector, including a shortage of skilled workers to meet the demands of a growing number of construction projects.
Economists and industry analysts are closely monitoring these figures, as they have direct implications for the final price of new homes. The sustained rise in construction costs is expected to be passed on to buyers, potentially impacting housing affordability. A representative from a leading Portuguese construction federation noted, "The pressure from labor costs is a structural issue we are facing. It requires a long-term strategy involving training and attracting new talent to the sector to ensure sustainable growth."
The government has acknowledged the challenges in the housing sector, though specific measures to address the rising costs of construction have yet to be detailed. The current data underscores a critical dynamic in the national economy, where the construction sector's performance is pivotal for both economic growth and meeting the population's housing needs. The July figures confirm that the path to stabilizing housing prices involves addressing the fundamental costs of bringing new properties to the market.
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