Portugal’s Construction-Wage Surge Drives Up Housing Costs and Public Budgets

Portugal’s construction sector closed September with another sharp rise in labour costs, a trend that is rippling through house prices and public-works budgets from Braga to Faro. Wage growth is now running far ahead of material costs, forcing builders, home-buyers and municipal planners to revisit their spreadsheets.

Payrolls break new ground

Fresh figures from the National Statistics Institute (INE) show that construction payrolls expanded at an annual pace of 9.7%, accelerating the remuneration index by 1.8 percentage points compared with August. At the same time, the employment index inched up to a 2.7% year-on-year rise, confirming that companies are still hiring despite dearer labour. On a month-to-month basis, wages dipped 2.3%—a seasonal correction after holiday bonuses—but the broader direction remains unmistakably upward. The Construction Production Index reflected the tension: total output grew 3% in September, yet builders insist the headline number would be stronger if labour were less expensive.

Why pay packets keep swelling

Several forces are combining to push earnings higher. The January uplift of the salário mínimo to €870 set a new floor for pay, automatically dragging the sector’s collective agreements, or Contratos Coletivos de Trabalho, up the scale. Negotiations between AICCOPN and the main construction union then layered on a richer wage grid, alongside an €8 daily meal allowance. Shortages of electricians, crane operators and bricklayers—made worse by emigration and ageing—mean companies often outbid each other for scarce talent. Add an industry-wide drive to restore real wages after the 2023 inflation spike, and the result is a labour market tilted decisively in favour of workers.

How dearer labour reaches your wallet

INE estimates that the Index of Costs for New Housing (ICCHN) climbed 4.8% in September, with labour alone accounting for roughly four points of that increase. Developers now whisper that every additional percentage point in payroll adds thousands of euros to the final listing price of a T2 flat in Lisbon or Porto. Public procurement is feeling the heat as well: bids for PRR-funded rail upgrades and hospital expansions are turning up well over ministry forecasts, forcing project managers to request supplementary funds or postpone ground-breaking.

Iberian contrasts, European context

Across the border, Spain’s consultants foresee a 3% rise in overall building costs for 2025, meaning Madrid is still far from Portugal’s wage-fuelled surge. In Italy the picture is even cooler, with cost inflation expected around 2% and contractors exercising caution amid tepid demand. Yet Eurostat puts the euro-area average increase in construction pay at 4.8%—only half the Portuguese rate—showing how unusual the current spike is. Paradoxically, the average hourly cost in Portugal remains just €18.5, well below the EU mean of €33.5, underscoring both how fast and how far the country still has to travel.

The road ahead

Economists expect lower European Central Bank rates next spring to revive mortgage approvals, potentially allowing developers to absorb higher wages without shrinking margins. If worker shortages persist, however, firms may accelerate recruitment drives in Brazil, Cape Verde or India, which could temper wage growth but raise questions about training and integration. What appears certain is that the era of cheap labour—long cited as a pillar of Portugal’s competitiveness in construction—is fading. Whether the industry can adapt without pricing out families and taxing public coffers will be one of the key economic stories of 2026.