Rising Homebuilding Expenses in Portugal Squeeze Buyers After 3.8% August Hike

Portugal’s builders just received more bad news. The national statistics office says the index that tracks the cost of erecting a brand-new home jumped 3.8 % in August, an increase that feeds straight into sale prices at a time when first-time buyers are already wrestling with high interest rates and a chronic shortage of supply. Below, we unpack where the extra money is going, who ultimately pays the bill and what officials in Lisbon can realistically do about it.

Construction costs march higher—and faster than wages

The Instituto Nacional de Estatística (INE) confirmed that August marked the third consecutive month in which the Construction Cost Index for New Housing (ICCHN) accelerated. While 3.8 % may sound modest beside double-digit spikes seen during the pandemic, developers contend it is still outpacing the growth of disposable income and undermining affordability. Industry federation AICCOPN notes that in 2024 the same index rarely moved beyond 2 %, underscoring how 2025 is shaping up to be a tougher year for balance sheets.

Materials versus manpower: what is driving the surge?

INE’s technical note attributes roughly half the August increase to pricier raw inputs. Cement, steel rebar and insulation products are once again the main culprits, pushed higher by energy costs and shipping bottlenecks in the Red Sea. The remainder of the rise comes from labour. Collective-bargaining agreements signed last spring lifted base salaries for bricklayers and electricians, and many firms are now offering retention bonuses to keep crews from heading to northern Europe, where hourly rates can be 30 % higher. Together, these forces have pushed the overall build-out budget for a standard T2 apartment in Lisbon to about €1,520 per square metre—€60 more than in January.

How the spike filters through to buyers and developers

For families hunting for a primary residence, every percentage point matters. AICCOPN calculates that the 3.8 % rise translates into roughly €3,700 extra on a typical 95 m² flat. Developers are also feeling the squeeze: profit margins that topped 18 % during the post-pandemic boom have slid towards 12 %, according to consultancy JLL. Some promoters are postponing launches until material prices stabilise, a decision that exacerbates the supply shortfall. Others are renegotiating pre-sales contracts, prompting legal tussles over escalation clauses that were once buried in the fine print.

Government weighs incentives over price caps

Aware that spiralling costs threaten its flagship Mais Habitação programme, the Government is exploring several levers. The Ministry of Infrastructure is revisiting VAT rebates on energy-efficient building materials, an idea first floated in 2022 but shelved when the fiscal outlook deteriorated. Simultaneously, experts at IHRU, the public housing institute, are drafting a proposal that would allocate low-interest Banco de Fomento credit lines to smaller contractors who adopt off-site modular construction, a technique that can shave weeks off completion schedules and reduce waste. Trade unions, for their part, urge Lisbon to fast-track skilled-labour visas, arguing that the only way to tame wage inflation is to widen the talent pool.

What to watch as 2026 budgets are drawn up

Economists increasingly believe that 2025 will close with construction costs about 4 % above 2024 levels, assuming commodities cool in the final quarter. Whether that predicts relief or fresh trouble for Portugal’s housing crisis depends on two variables: the pace at which the European Central Bank cuts borrowing costs and the Government’s success in converting policy sketches into shovel-ready projects. If either effort stalls, analysts warn that potential homeowners could face a second year of double-sided pressure—higher mortgage rates on top of dearer bricks and mortar.

What is certain is that the 3.8 % uptick recorded in August is more than a statistical footnote. It signals that, even after the drama of supply-chain disruptions and pandemic-era shutdowns, building a home in Portugal remains a costlier affair month after month—and that the path to lower prices will demand more than just patience.