Portugal experienced the fourth-largest increase in construction costs for new homes last year, a position it last held in 2020. The surge in expenses is largely driven by rising labor costs, though current data doesn’t yet reflect the impact of recent disasters in the central region of the country or the ongoing conflict in Iran.
According to data from Eurostat, Portugal’s construction costs for new homes rose 4% in 2024, placing it fourth among the 16 European Union member states with available data. This increase matched Lithuania’s 4% rise, trailing only Bulgaria (+11.8%), Romania (6.9%), and Slovenia (4.4%).
Portugal has only seen a similar ranking once before, in 2020, during the first year of the COVID-19 pandemic. At that time, the cost of building a new home in Portugal also increased by 4%. Eurostat’s statistics typically include data from 16 to 20 countries, though data isn’t available for Belgium, Ireland, France, Croatia, Luxembourg, Poland, and Slovakia.
Unlike the period between 2021 and 2023, the current cost pressures aren’t stemming from material prices, which saw a modest 1% increase in January. Instead, labor costs are the primary driver, rising from around 5% before the war in Ukraine to approximately 8% in both 2024 and 2025, according to the National Statistics Institute (INE). In January, the annual variation in labor costs was 7.7%.
Construction companies are facing labor shortages amidst high demand, fueled in part by the Recovery and Resilience Plan (PRR). Simultaneously, residential demand remains strong while supply struggles to keep pace. House prices increased by 17.6% in 2025, the largest annual increase since at least 2010. In Lisbon, the average price per square meter exceeded €5,000 for the first time. The recent catastrophes in the central region and the war in Iran are expected to add further pressure this year.
Construction cost increases were even more pronounced recently. From the summer of 2021, the indicator climbed for a year and a half, peaking at 12.3% in January 2023. This was initially driven by supply chain disruptions during the pandemic and then exacerbated by the invasion of Ukraine, which caused energy costs to soar. Material costs rose 16% by the end of 2022.
Costs subsequently began to moderate in the following years, but have been steadily increasing again since October 2024. Excluding the turbulent period following the war in Ukraine, the current increases are the highest since the global financial crisis of 2009.
