Portugal's New-Build Construction Costs Climbed 6.9% in the Year to May, Led by Labour Rather Than Materials

The cost of putting up a new home in Portugal is still rising faster than most household budgets. New figures from the Instituto Nacional de Estatística (National Statistics Institute, or INE) show that the index tracking the price of building new housing climbed 6.9% in the year to May 2026 — a fresh acceleration that will feed, eventually, into the asking prices buyers see.

The number comes from the Índice de Custos de Construção de Habitação Nova (New Housing Construction Cost Index), which measures what it costs developers to build rather than what finished homes sell for. On a monthly basis, costs rose 1.1% between April and May, and the annual rate was 0.9 percentage points higher than the month before — a sign that the pressure is building again rather than easing.

Labour, not just materials

For much of the post-pandemic period, the story of construction inflation was about materials — timber, steel and insulation whose prices spiked with global supply shocks. That has shifted. In the year to May, labour costs rose 7.5% while materials rose 6.4%, and the two contributed almost equally to the headline figure, adding 3.5 and 3.4 percentage points respectively.

The prominence of wages reflects a chronic shortage of skilled tradespeople. Portugal's building sector lost tens of thousands of workers during the last crisis and has struggled to replace them, leaving bricklayers, electricians and plumbers in short supply even as demand for new housing runs hot. When labour is scarce, its price rises — and unlike a one-off spike in the cost of cement, wage pressure tends to be sticky.

Where the material costs bit hardest

Among materials, the sharpest increases were tied to energy and metals. INE flagged bitumen and diesel, both closely linked to oil prices, as rising around 30% over the year, while copper wire and PVC piping climbed roughly 25%. Only prefabricated concrete products registered a fall — a rare pocket of relief in an otherwise upward table.

Those categories matter because they touch nearly every project: diesel powers the machinery and the deliveries, copper runs through the walls of every flat, and piping is unavoidable in kitchens and bathrooms. When their prices move together, the effect is felt across the whole build rather than in one trade.

Why it matters for buyers and renters

Construction costs are not the same as house prices, but they set a floor beneath them. When it becomes more expensive to build, developers either pass the increase on to buyers or shelve projects that no longer add up — and fewer new homes completed means tighter supply in a market already short of housing. For a country where affordability has become the dominant political grievance, a 6.9% annual rise in build costs is an unwelcome undercurrent.

It also complicates the government's housing ambitions. Public programmes that promise thousands of new affordable homes are priced against exactly this index, and every rise in labour and material costs stretches the same budget across fewer units. For foreign residents weighing whether to buy an existing flat or build, the data point in one direction: the premium on new construction is not shrinking, and the labour squeeze behind it shows little sign of resolving soon.