Construction Costs Continue to Limit Housing Supply in Portugal

The Association Portuguesa de Promotores e Investidores Imobiliários (APPII) has warned that construction costs and delays in licensing are continuing to limit the supply of housing in Portugal. According to data from the Confidencial Imobiliário, construction costs for new housing rose 7.2% in June, while new housing credit grew 12% in the first half of the year. The APPII has expressed concerns that these rising costs are affecting the production of new housing.

The costs of construction, including labor and materials, have continued to increase. In June, labor costs rose 8.0% and materials costs rose 6.5% compared to the same period last year. Compared to May, materials costs decreased 0.2%, while labor costs increased 1.5%. The production of construction work grew 1.8% in July compared to the same period last year, driven by a 2.9% increase in civil engineering and a 1.1% increase in building construction.

Despite the growth in construction production, the number of building licenses issued fell 7.1% in the second quarter. However, the number of completed housing units increased 11.6% to 11,834. The APPII has called for measures to address the rising costs of construction and to simplify the licensing process. The association believes that these measures are necessary to increase the supply of housing and make it more affordable.

The value of bank valuations for housing has continued to rise, reaching a median of €2,254 per square meter in August. This represents a 14.7% increase compared to the same period last year and a 0.6% increase compared to July. The increase in valuations has been driven by a 17.0% rise in apartment prices and a 12.6% rise in house prices.

The Península de Setúbal region recorded the highest increase in valuations, with a 20.4% rise in July. New housing credit has also increased, reaching €12,187 million in the first half of the year, up 12% compared to the same period last year. The average monthly payment for housing credit rose €3 to €414 in July, while the implicit interest rate was 3.135%.

The APPII has emphasized that making housing more affordable requires more than just measures to stimulate demand. The association believes that it is essential to address the conditions under which housing is produced, including reducing construction costs, simplifying licensing procedures, and reducing the burden of fiscal and administrative charges.

The APPII has proposed several measures to increase the supply of housing, including reducing construction costs, streamlining licensing procedures, and reducing the weight of fiscal and administrative charges on the final price. The association believes that these measures will enable the construction of more housing, more quickly, and at more competitive costs.

Key points

• Construction costs for new housing in Portugal rose 7.2% in June.
• New housing credit in Portugal grew 12% in the first half of the year.
• The APPII is calling for measures to reduce construction costs and simplify licensing procedures to increase the supply of housing.