New-Home Construction Costs Slowed to 6.8 Percent in July, With Copper Wire Up 25 Percent and Not a Single Material Cheaper Than a Year Ago
INE's ICCHN eased 0.6 points on the previous month, and for the first time this year labour and materials contributed equally at 3.4 percentage points each. The month-on-month change was zero. PVC pipe is up 20 percent and bitumen 15.
The cost of building a new home in Portugal rose 6.8 percent in the year to July, according to INE's Índice de Custos de Construção de Habitação Nova. That is 0.6 percentage points slower than the previous month, which the statistics office now reads at 7.4 percent, above the 7.2 percent it first estimated for June.
Slower is not the same as cheap. Behind the headline figure, materials rose 6.3 percent over the year, against 6.4 percent in June, and labour rose 7.3 percent, down 1.1 points on the previous month. Month on month, the index did not move at all: the chain-linked variation for July was zero, 0.8 points below June and 0.6 points below the same month of 2025.
Labour stops being the main driver
The interesting change is in the composition. For most of this year the story of Portuguese construction costs has been wages: in June, labour contributed 4.0 percentage points to the annual rate while materials contributed 3.4, and we reported at the time that pay had overtaken materials as the main driver.
In July the two halves are level. Labour contributed 3.4 percentage points and materials contributed 3.4 percentage points, an even split. Within the month, labour actually pulled the index down slightly, contributing minus 0.2 points to the chain variation against plus 1.0 points in June, while materials contributed plus 0.2 points.
Copper, PVC and bitumen
INE names the materials doing most of the pushing, and they are the unglamorous ones. Bare and coated copper wire is up 25 percent year on year. PVC piping is up 20 percent. Bitumens are up 15 percent. Between them they describe a building whose electrical, plumbing and waterproofing costs are rising far faster than the structure around them.
The statistic that should carry most weight for anyone budgeting a build is the one INE states almost in passing: not a single material in the basket recorded a year-on-year fall. There was no offsetting decline anywhere in the index. Everything the survey tracks is dearer than it was in July 2025, and the deceleration in the headline number reflects a slower rate of increase rather than any part of the cost base coming down.
Why this index keeps mattering
The ICCHN is a cost index, not a price index. It measures what it costs to put up a new dwelling, and it feeds through to asking prices with a lag and with a margin on top. A construction sector running at nearly 7 percent annual cost inflation while the government is committed to large affordable-housing programmes is a structural problem for those programmes, because every euro of public money buys progressively fewer square metres.
It also sets the context for the 6 percent VAT rate that took effect on 1 July for eligible construction and rehabilitation work, capped at homes valued up to 660,982 euros. That measure was designed to take a slice off the delivered cost of new housing. On the July numbers, roughly a year of material and labour inflation is enough to consume it.
The next reading, covering August, is due in early October.
